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FOUNDRY  COST 
ACCOUNTING 

PRACTICE  AND  PROCEDURE 


By  ROBERT  E.  BELT 

CERTIFIED  PUBLIC  ACCOUNTANT;  COST  ACCOUNTANT  OF 

THE  AMERICAN  MALLEABLE  CASTINGS  ASSOCIATION 

CLEVELAND,  OHIO 


»   ■>     i    ■» 


1919 


Copyright,  1919, 

By 
Robert  E.  Belt 


(\vft 


a*^ 


PREFACE 

Several  excellent  books  have  been  written  within  the  past 
ten  years  on  the  subject  of  cost  accounting;  and  while  the 
principles  have  been  set  forth  more  or  less  clearly  and  may  be 
said  to  be  of  general  application,  yet  the  cost  accountant  with 
limited  experience  ordinarily  has  difficulty  in  applying  them 
to  a  particular  industry.  There  are  many  industries  that  are 
peculiarly  different  and  where  it  is  difficult  and  sometimes 
impracticable  to  apply  the  conventional  cost  accounting  prin- 
ciples and  procedure.  This  is  particularly  true  in  the  foundry 
industry. 

In  this  volume,  therefore,  the  aim  has  been: — 

(1)  To  set   forth  in  a  simple  and  direct  manner,   for 

the  guidance  of  the  foundry  cost  accountant, 
practical  principles  of  accounting  that  are  appli- 
cable to  the  foundry  industry,  and  to  show 
methods  of  collecting  the  cost  data  and  of 
accurately  determining  production  costs. 

(2)  To   impress   upon   the   executive   and   the   manage- 

ment the  importance  of  an  accurate  knowledge 
of  costs  and  the  dangers  of  a  price  policy  that 
is  not  founded  on  production  costs. 

No  attempt  has  been  made  to  present  all  that  might  be 
said  on  the  subject  of  foundry  costs.  On  the  contrary,  the 
aim  has  been,  while  omitting  no  essential  details,  to  be  brief 
and  concise  and  to  reduce  to  a  minimum  the  description 
essential   to   a   clear   presentation    of    the   principles. 

Every  principle  of  cost  accounting  set  forth  herein  is 
not  only  applicable  to  foundry  practice  but  is  being  used  in  a 
thoroughly  practicable  manner  and  is  giving  satisfactory  results. 

It  is  not  claimed  that  the  procedure  outlined  is  exactly 
suitable  to  all   foundries.     The  claim  is   made,   however,   that 

V 

43904G 


VI  PREFACE 

with  minor  adaptations,  the  principles,  the  forms,  the  classi- 
fications of  accounts,  the  methods  of  distributing  overhead 
expense,  and  the  procedure  in  determining  the  cost  of  indi- 
vidual jobs  or  classes  of  work,  can  be  used  in  a  satisfactory 
manner  by  practically  every   foundry. 

While  a  small  proportion  of  the  more  successful  found- 
ries of  the  country  have  excellent  cost  systems  and  determine 
their  costs  accurately  and  make  use  of  the  information,  yet 
the  majority  do  not  have  systems  worthy  of  the  name  and  if 
this  volume  is  the  means  of  aiding  in  the  improvement  of  the 
cost  accounting  practice  of  the  latter  class,  it  will  have  served 
a  useful  purpose. 

The  Author. 

October,   1919. 


CONTENTS 

Chapter                                                                                                     Page 
I    Importance  of  an  Accurate  Knowledge  of  Costs 15 

Value  of  Cost  Information 

An  Accurate  Cost — the  only  True   Price  Basis 

Advantages    of    Modern    Cost    Methods 

Government  Urging  Improvement  in  Cost  Methods 

Costs — an    Index   of    Operating    Efficiency 

Objections    to     Installing    a    Cost     System 

Cost    System    an    Investment,    not    an    Expense 

II    Uniform    Cost    Finding    Methods    and   the    Effect    on 

Competition      25 

Fundamental    Principles    of    Accounting 

Co-operation   in   Cost   Work 

Cost    Uniformity    Needed 

Intelligent     Competition     Depends     upon    a     Knowledge     of 

Costs 
Weakness  of   the  Foundry   Industry 
Work  of  Trade  Associations 
Better    Competitive    Spirit 

III  Examination  of  Plant  Practices  and  Operating  Con- 

ditions          33 

Reasons   for  Examination 
Raw    Materials 
Operating  Departments 
Operating   Conditions 
Class    of    Product 
Power,    Heat    and    Light 
Elimination    of    Waste 
Plant  Order 

IV  Installing   and    Operating   a   Cost    System 39 

Co-operation   of   Management   Needed 

Accounting   in   the   Foundry   Industry   not   Difficult 

Modifying    an    Existing    Cost    System 

Expansion     of     Cost     Practice 

Avoidance    of    Unnecessary    Detail 

Application   of    Cost    Principles 

Preparation   of    Reports 

Design  of   Forms 

Uniform    Forms    not    Essential 

Cost  System   Should  not  be   Independent  of  General  Books 

VII 


VIII  CONTENTS 

Chapter                                                                                                  Page 
V    Accounting    Practice   and   Records 47 

Introduction 
Purchase    Requisition 
Purchase   Order 
Invoices    from    Creditors 
Stores 

Stores  Record 
Stores    Requisition 

Stores   System  not  Essentially  Required   for  Cost  Account- 
ing   Purposes 
Inventory   of   Pig   Iron 
Inventory  of  Coke 
Inventory  of   Coal 
Inventory    of    Fire    Brick 
Inventory  of  Sand 

Inventory   of    Partly   Finished   and   Finished   Castings 
Annual   Physical  Inventory 
Basis   of   Physical   Inventory 
Accounts    Payable    Voucher 
Voucher  Record 
Pay   Roll 

Pay    Roll    Distribution    Sheet 
Record  of  Employees 

VI    Operating    Departments    and  Department  Records 73 

Introductory 
Melting    Department 
Departmental  Line 
Record  of  Heats 
Blacksmith  Shop 
Slag  Mill 
Laboratory 

Molding   Department 

Departmental  Line 

Production  Order 

Production   Order  Tag 

Molder's    Daily    Production    Card 

Molder's    Summary   Production   Card   or    Sheet 

Shifting 

Superintendent's    Daily    Production    Report 

Matches 

Pattern    Shop 

Customer's    Pattern    Cost    Record 

Pattern  Vault  Card 

Pattern    Shop    Repair    Order 

Carpenter  Shop 

Shop   Order 


CONTENTS  IX 

Chapter  Page 

coremaking    department 

Departmental    Line 
Production  Order 
Core    Production 
Core  Loss 
Core   Delay- 
Core   Ticket 

Coremaker's    Summary   Production    Card   or    Sheet 
Core   Stock  Record 

Cleaning    Department 
Tumbling 
Sand-Blasting 

Separate   Costs   of   Tumbling   and    Sand-Blasting 
Departmental    Line 

Trimming    and    Inspecting    Department 
Rigid  Inspection,  an  Important  Cost  Factor 
Inspection    Report 
Oven    Record 

Trimming   Department   Report 
Elimination    of    Hard    Iron    Weight 
Departmental    Line 

Annealing   Department 
Pots   and    Bottoms 
Annealing   Oven    Report 
Departmental   Line 

Finishing    and    Shipping    Department 
Finishing  Room 
Air   Chipping 
Time   Record 
Shipping    Room 
Shipping  Record 
Returned  Castings 

VII    Classification    and    Definition    of    Accounts 127 

Introductory 

Classification  of  Accounts  for  Grey  Iron  Foundries 
Definition  of  Accounts  for  Grey  Iron  Foundries 
Diagram  of  Accounts  for  Large  Grey  Iron  Foundries 
Classification  of  Accounts  for  Malleable  Iron  Foundries 
Definition  of  Accounts  for  Malleable  Iron  Foundries 
Diagram  of  Accounts  for  Large  Malleable  Iron   Foundries 
Classification  of  Accounts  for  Steel  Foundries 
Definition  of   Accounts   for    Steel   Foundries 
Diagram  of  Accounts  for  Large  Steel  Foundries 
Distribution   of   Fixed    Plant   Charges 

Power,    Heat   and    Light 

Depreciation,    Taxes    and    Insurance 


X  CONTENTS 

Chapter  Page 

Medical  and  Hospital,  Liability  Insurance,  Superin- 
tendent, General  Foreman,  Misc.  Yard  Labor,  and 
Misc.    Plant    Expense 

Recapitulation    of    Monthly    Fixed    Plant   Charges 

Monthly  Journal  Entries  to  Distribute  Fixed  Plant 
Charges    Departmentally 

Interest   on   Investment 

VIII    Monthly     Statements     195 

Introductory 

Monthly   Statement   of    Labor   Costs 

Monthly  Statement  of  Total  Costs 

Comparative  Statement  of  Total  Costs 

Production    Statement — Monthly    and    Comparative 

Profit    and    Loss    Statement 

IX    Product     Costs     205 

Introductory 

Tonnage  Costs 

Class   Costs 

Customer's  Costs 

Job  Costs 

Flexibility  of  Cost  System 

Direct   Charges 

Metal 

Melting 

Molding    Direct    Labor 

Special    Pattern   and    Flask   Expense 

Coremaking   Direct   Labor 

Finishing  Direct  Labor 
Indirect     Charges 
Methods    of    Distributing    Indirect     Charges 

Molding   Direct   Labor   Basis 

Molding   Man-Hour    Basis 

Molding    Machine-Hour    Basis 

Tonnage  Basis 

Molding    Department 

Coremaking    Department 

Cleaning    Department 

Trimming    and    Inspecting    Department 

Annealing    Department 

Finishing  and   Shipping  Department 

General    Expense 

Summary 
Importance  of  an   Equitable   Distribution  of   Overhead   Ex- 
pense 
Job    Cost    Record 
Job  Cost  Card 


CONTENTS  XI 

Chapter  Page 

X    Depreciation     235 

Depreciation  Inevitable 

Causes    of    Depreciation 

Methods   of   Providing   for   Depreciation 

Straight    Percentage    Method 

Reducing  Balance  Method 

Combined    Depreciation   and    Maintenance    Method 
Repairs  and   Their  Treatment 
Repairs  and   Replacements 
Rates  of  Depreciation 
Replacements    Restore    Plant    Values    and    Reduce    Accrued 

Depreciation 
Patterns,   Flasks,  Tools   and    Small   Equipment   Items 
Depreciation  of    Pattern   Equipment 
Equipment  Inventory  Sheet 
Detailed  Equipment  Record 

XI    Estimates    and    Quotations    249 

Importance  of  Reliable  Estimates 

Advantages  of  Preparing  Estimates  in  Uniform  Manner 

Preparing   and    Preserving   Estimates 

Form   of    Estimate    Sheet 

Explanation  of   Estimate   Sheet 

Market  Price  of  Iron  Should  be  the  Iron  Quotation  Basis 

XII    Profits      257 

Profit   Ideas 

Profit  on  Light  and  Heavy  Work 

Production  per  Molder  per  Day,  the  Profit  Factor 

Profit  Rate  Verification 

Profit  per  Day  per  Unit  on  Molding  Floor  Space 


FORMS,  TABLES  AND  DIAGRAMS 

Page 

Purchase    Requisition    47 

Purchase    Order    ,....  49 

Stock  Record    51 

Stores    Requisition    53 

Record  of  Iron   Consumed   56 

Voucher   Check    . . 62 

Accounts  Payable  Voucher   63 

Voucher  Record  .. . 64 

Departmental  Pay  Roll    68 

Pay  Roll  Distribution  Sheet  70 

Record    of    Employees 71 

Daily  Heat   Record    75 

Blacksmith  Shop  Time  and   Material  Report     76 

Pig  Iron  Analysis   Record 77 

Production  Order   80 

Production   Order   Tag 81 

Molder's   Daily   Production    Card * . . . .  82 

Molder's  Summary  Production  Sheet 84 

Molder's   Summary   Production   Card 86 

Superintendent's    Daily    Production    Report 87 

Matchmaker's   Daily  Report 88 

Pattern  Shop  Time  and  Material  Report 90 

Customer's   Pattern  Cost   Record 91 

Pattern  Vault  Card   92 

Pattern  Shop  Repair   Order 93 

Carpenter  Shop  Time  and  Material  Report 94 

Core  Delay  Report  98 

Core  Ticket   99 

Coremaker's  Summary  Production   Card 100 

Coremaker's   Summary  Production   Sheet 101 

Core   Stock  Record    103 

Trimming  Department  Report   (Grey  Iron  and   Steel) 108 

Trimming  Department  Count 109 

Oven    Record    110 

Trimming  Department  Report  (Malleable)    Ill 

Annealing  Oven  Report  116 

Finishing  Department  Time  Record  (Steel  and  Malleable) 118 

Finishing   Department   Time   Record    (Grey   Iron) 119 

XIII 


XIV  FORMS,  TABLES  AND  DIAGRAMS 


Page 


Shipping    Record     120 

Summary  Record  of  Shipments   121 

Invoice     122 

Record  of   Returned   Castings    124 

Diagram    of    Accounts    for    Large    Grey    Iron    Foundries 172 

Diagram  of  Accounts  for  Large  Steel   Foundries 176 

Diagram  of  Accounts  for  Large  Malleable  Iron  Foundries 180 

Distribution   of  Power,   Heat  and   Light 190 

Distribution  of  Medical  and  Hospital  Expenses,  Superintendence, 

Misc.  Yard  Labor,  and  Misc.  General  Expenses 191 

Distribution  of  Depreciation,  Taxes  and  Insurance 192 

Recapitulation    of    Monthly    Fixed    Plant    Charges 194 

Monthly    Statement    of    Labor    Costs 196 

Monthly  Statement  of  Total  Costs 198 

Comparative   Statement  of  Total  Costs 200 

Production     Statement 202 

Profit   and    Loss    Statement    203 

Comparative    Costs    Using   Different    Bases    to    Distribute    Over- 
head   Expense    226 

Job    Cost    Record 230 

Job   Cost  Card   233 

Table   of  Depreciation    Rates 241 

Equipment    Inventory    Sheet 247 

Equipment  Record    248 

Estimate    Sheet    252 

Profits  in  Relation  to  Production 262 


FOUNDRY  COST  ACCOUNTING 

Practice  and  Procedure 
CHAPTER  I 

IMPORTANCE  OF  AN  ACCURATE  KNOWLEDGE  OF 

COSTS 

Value  of  Cost  Information 

To  foundrymen,  the  subject  of  costs  is  not  of  general 
interest  for  the  reason  that  only  a  small  proportion  appreciate 
the  importance  of  the  term.  They  do  not  realize  what  the  term 
"cost  of  production"  really  means  to  them  in  their  business, 
they  fail  to  appreciate  that  an  accurate  knowledge  of  cost  of 
production  generally  spells  success,  and  that  ignorance  of  true 
costs  usually  denotes  failure. 

About  two  years  ago  when  Edward  N.  Hurley  was  chair- 
man of  the  Federal  Trade  Commission,  an  attempt  was  made 
to  learn  from  the  two  large  commercial  rating  houses  (both 
of  which  report  on  the  cause  of  business  failures)  just  what 
was  the  percentage  of  failures  among  manufacturers  who 
actually  knew  the  cost  of  each  product  they  manufactured. 
A  number  of  the  best  informed  agents  of  these  two  commer- 
cial rating  companies  were  interviewed  and  they  reported  that 
only  in  rare  instances  did  the  concerns  know  their  costs 
of  production  and  that  in  a  large  peicentage  of  cases  it 
was  the  absence  of  exactly  such  information  that  lead  to  the 
business  failure. 

It  would  be  interesting  to  know  the  percentage  of  failures 
that  have  resulted  from  selling  castings  without  the  knowledge 
of  their  actual  cost  of  production.  Without  question,  failures 
due  to  this  cause  have  been  numerous. 

It  is  not  uncommon,  even  today,  to  find  foundries  making 
an    interest    return    on    tfheir   investment,   but   making    almost 

15 


16  :   -  "FOUNDRY-  COST  ACCOUNTING 

every  penny  of  their  profit  on  as  little  as  25%  of  the  total 
volume  of  their  business.  That  condition  is  the  result  of  the 
absence  of  a  knowledge  of  what  it  costs  to  produce  each  class 
of  castings  going  through  the  foundry.  It  is  a  condition  that 
is  not  healthy  to  say  the  least.  It  is  dangerous  to  the  in- 
dividual and  demoralizing  to  the  industry.  And  there  is  only 
one  solution  to  the  problem,  and  that  is  to  know  the  cost  of 
each  class  of  castings  you  manufacture.  You  are  then  in  a 
position  to  price  each  class  individually  and  to  know  your 
returns  on  each  class. 

The  progressive  foundries  of  today  have  the  satisfaction 
of  knowing  that  they  are  making  a  profit  on  each  class  of 
work  they  produce  and  that  a  fairly  uniform  rate  of  profit 
is  made  on  each  class.  This  is  the  result,  in  a  large  measure, 
of  campaigns  for  better  cost  accounting.  Within  the  past  few 
years  there  have  been  installed  in  a  large  number  of  the 
foundries  of  the  country  uniform  cost  accounting  systems,  that 
today  are  making  themselves   felt  in  stabilizing   conditions. 

In  those  foundries  uniform  fundamental  principles  of 
cost  accounting  are  recognized  and  followed  with  the  result 
that  costs  are  built  up  in  a  like  manner  and  that  they  include 
like  elements  of  cost.  In  competing  with  one  another  these 
companies  can  feel  that  they  are  competing  on  an  equal  basis 
and  have  the  satisfaction  of  knowing  that  they  will  not  be 
called  upon  to  meet  a  ridiculous  price  that  has  been  based 
upon  a  widely  different  cost  determined  in  an  entirely  different 
manner. 

The  day  of  being  guided  solely  by  an  average  cost  is 
rapidly  passing.  In  a  foundry,  an  average  cost  for  all  work 
is  sadly  misleading.  In  some  respects,  such  information  is 
worse  than  nothing  for  if  one  is  guided  bf  it,  they  are  sure 
to  go  wrong.  To  say  that  a  casting  which  a  molder  can 
produce  but  150  pounds  per  day  costs  little  more  per  pound 
than  a  casting  which  he  can  produce  900  pounds  is  an  acknowl- 
edgment of  misinformation;  and  to  say  that  the  profit  per 
pound  on  the  150-pound  job  need  be  no  greater  than  on  the 


IMPORTANCE  OF  COSTS  17 

900-pound  job  is  an  acknowledgment  of  an  entire  disregard 
of  the  fundamental  principles  upon  which  prices  should  be 
based. 

An  Accurate  Cost — the  Only  True  Price  Basis 

Accurate  cost  information  is  undeniably  the  only  true 
basis  upon  which  to  make  prices,  and  arbitrarily  naming  a  price 
irrespective  of  what  the  product  costs  almost  invariably  pro- 
duces bad  results — bad  results  not  alone  to  the  individual  com- 
pany but  to  the  industry  as  a  whole.  The  foundryman's  most 
dangerous  competitor  and  the  industry's  greatest  menace  is 
the  fellow  who  does  not  know  what  his  different  kinds  of  cast- 
ings cost  him  to  produce.  Competitive  conditions  are  seriously 
disturbed  where  losses  on  one  or  more  kinds  of  work  are 
recovered  from  profits  on  other  kinds  of  work.  It  is  obvious 
that  one  should  know  the  cost  to  produce  each  kind  of  work 
he  manufactures. 

The  man  who  produces,  say,  four  different  classes  of 
work,  two  of  which  he  sells  at  a  profit  and  two  at  a  loss, 
unknowingly,  causes  a  lot  of  trade  disturbance.  In  the  first 
place,  his  ignorance  is  undermining  his  own  success,  and  in 
the  second  place,  he  is  not  playing  fair  with  his  competitor  who 
may  be  better  located  and  equipped  to  manufacture  the  lines, 
which  the  other  unknowingly  has  been  selling  at  a  loss.  Is 
it  fair  competition  to  be  obliged  to  meet  a  price  that  is  made 
upon  a  guess,  a  price  that  may  be  less  than  the  actual  cost  of 
maufacture?  It  is  the  exception  and  not  the  rule  to  find 
foundrymen  fortified  with  a  knowledge  of  the  cost  of  each 
product  they  manufacture. 

Businesses  are  conducted  in  order  to  make  money,  and 
the  only  way  to  make  money  is  to  sell  the  product  for  more 
than  it  costs.  The  essential  then  is  to  know  the  cost.  It 
cannot  be  disputed  that  the  small  margin  of  profit  existing 
in  so  many  of  our  industries  is  due  to  the  ignorance  on  the 
part  of  manufacturers  of  what  their  goods  actually  cost  to 
produce.     This   ignorance   causes    them   to    make   unprofitable 


18  FOUNDRY   COST  ACCOUNTING 

prices    which    the   manufacturer    who    does    know    his    cost    is 
very  largely  forced  to  meet. 

Advantages   of  Modern   Cost   Methods 

Practically  all  foundrymen  recognize  the  importance  of 
accurate  and  dependable  technical  information  in  the  manage- 
ment of  their  plant;  of  determining  scientifically  the  con- 
stituents and  properties  of  their  iron,  and  of  melting  under 
strict  laboratory  control;  the  advantage  of  paying  labor  on 
the  piece-rate  and  bonus  basis  over  the  old-fashioned  day  rate 
basis;  the  advantages  of  molding  machines  over  hand  molding; 
the  importance  of  modern  methods  of  handling  and  conveying 
materials,  etc.  While  they  admit  that  the  foundry  adopting  the 
more  modern  technical  and  physical  methods  has  an  advantage, 
they  are  extremely  slow  to  admit  that  a  foundry  can  have 
an  equal  advantage  in.  modern  office  and  business  methods — 
methods  by  which  the  operating  efficiency  of  the  plant  can  be 
watched  and  by  which  true  costs  of  the  product  can  be 
determined.  No  matter  how  modern  and  improved  may  be 
the  technical  end  of  the  business,  its  successful  conduct  is  not 
assured  unless  the  cost  of  the  various  classes  of  product  is 
known  and  the  product  disposed  of  at  a  figure  in  excess 
of  cost.  The  successful  conduct  of  any  business  depends  upon 
selling  the  product  at  a  profit,  and  in  order  to  be  sure  one  is 
selling  at  a  profit  the  accurate  cost  of  what  he  is  selling  must 
be  positively  known. 

Experience  has  demonstrated  over  and  over  that  in  the 
production  of  castings  it  is  not  safe  to  base  a  selling  price  on 
an  average  cost.  In  a  jobbing  foundry  the  cost  of  the  work 
of  no  two  customers  is  the  same;  the  cost  of  no  two  patterns 
of  castings  is  the  same.  With  almost  every  order,  conditions 
vary,  and  the  cost  of  production  always  varies  with  the  condi- 
tions. The  variations  in  cost  should  be  known,  studied, 
analyzed  and  watched.  To  enable  one  to  watch  his  costs  and 
thereby  to  know  the  results  of  his  business  he  must  have 
practical,   up-to-date   accounting  and   office   methods. 


IMPORTANCE  OF  COSTS  19 

Government    Urging    Improvement   in    Cost    Methods 

The  Federal  Trade  Commission,  the  Tariff  Commission,  the 
Forestry  Service,  and  other  Federal  and  state  governmental 
bodies  have  been  urging  business  men  to  give  the  subject  of 
costs  the  attention  it  deserves. 

The  Chairman  of  the  Federal  Trade  Commission,  Wm.  B. 
Colver,  in  a  recent  address  on  the  subject  "Standardized  Ac- 
counting Systems  Recommended"  stated  that: 

"The  business  world,  well  aware  of  the  extent  to  which 
defective  cost  accounting  methods  prevail,  is  alert  to  promote 
reforms.  A  few  years  ago  the  Federal  Trade  Commission 
initiated  an  effort  to  be  helpful  in  this  direction  and  applied 
to  Congress  for  funds  to  carry  it  on.  As  these  were  not  given, 
the  movement  lagged,  but  as  a  result  of  the  Commission's 
enforced  studies  and  as  a  by-product  of  its  war  work,  that 
effort  may  well  be  profitably  and  economically  resumed.  If 
the  earlier  effort  of  the  Commission  could  have  gone  forward 
before  the  war,  the  government  would  have  been  repaid  many 
times  over  during  the  war  through  making  it  possible  to 
ascertain  costs  much  more  expeditiously  and  cheaply. 

"In  the  immediate  future  the  question  of  costs  will  be 
especially  critical  for  the  nation's  business  in  arriving  safely 
at  postwar  readjustments.  The  matter  is  important  to  the 
individual  producer,  to  his  banker,  to  industry,  and  to  the 
public  at   large. 

"From  its  experience  of  cost-finding  the  Commission 
stands  for: 

"Standardized  accounting  systems,  suited  to  the  various 
industries. 

"Cost  and  profit  accounting  for  individual  products. 

"Reasonable  standardization  of  products  and  elimination  of 
excessive  costs  due  to  unnecessary  multiplication  of  styles 
and  types. 

"Compilation  and  issue  of  current  basic  trade  information. 


20  FOUNDRY  COST  ACCOUNTING 

"Conferences  between  industries  and  government  for  the 
exchange  of  proper  and  useful  views  and  information." 

Investigations  by  the  Federal  Trade  Commission  have 
shown  that  a  majority  of  our  business  failures  can  be  attributed 
to  poor  accounting  and  inadequate  business  information.  It  has 
been  found  that  bad  office  methods,  inadequate  and  unreliable 
costs  of  production  and  distribution  cause  a  great  deal  of 
unfair  competition  and  a  heavy  business  death  rate. 

With  better  accounting  many  of  the  bad  business  practices 
in  the  foundry  industry  would  be  brought  to  light  and  promptly 
curbed.  When  accurate  results  are  known  conditions  never 
become  so  bad,  as  good  accounting  gives  reliable  information 
and  timely  warning. 

The  industries  of  the  country  that  are  strong  industrially, 
commercially  and  financially  are  the  ones  where  attention  has 
been  given  to  the  recording  of  adequate  business  informa- 
tion, where  costs  are  known,  studied,  and  analyzed,  and  where 
prices  can  be  made  intelligently.  A  prominent  manufacturer, 
in  speaking  of  his  cost  department,  said,  "It  costs  me  eighty 
thousand  dollars  a  year  to  run  this  room  but  it  is  worth  all  it 
costs  for  it  gives  me  the  inside  details  of  my  business  so  that 
I  know  what  I  am  doing."  The  experience  of  this  manu- 
facturer is  no  different  from  that  of  others  who  know  what 
they  are  doing  and  why  they  are  doing  it. 

Costs — an    Index   of   Operating    Efficiency 

Accurately  kept  costs,  apart  from  being  the  only  logical, 
safe  and  sound  basis  for  pricing  a  product,  are  an  index  of 
operating  efficiency.  With  properly  prepared  costs,  the  rela- 
tive efficiency  of  the  various  departments  of  a  plant  can  be 
watched  and  compared.  The  current  results  obtained  in  each 
department  can  be  checked  against  those  obtained  in  the 
past,  thereby  showing  increases  in  efficiency,  or  the  reverse, 
and  the  results  of  improvements  in  plant  practice.  The 
judicious  use  of  accurately  prepared  costs  will  bring  to  light 
poor  and  inefficient  management,  and  will  enable  standards 


IMPORTANCE  OF  COSTS  21 

to  be  set  for  the  less  efficient  departments,  based  on  what 
has  actually  been  done  in  departments  that  are  being 
properly  and  efficiently  administered.  In  this  way,  a  com- 
plete and  properly  kept  cost  accounting  system  will  be 
found  to  exercise  the  important  and  productive  function  of 
lowering  costs  and  holding  them  at  the  lowest  possible 
level. 

It  is  a  fact,  too  little  realized,  that  correct  cost  keeping 
is  fundamentally  related  to  manufacturing  efficiency. 
Modern  accounting  is  the  means  by  which  a  business  is 
analyzed  and  the  efficiency  of  its  different  operations 
weighed  and  measured.  It  enables  valuable  comparisons  to 
be  made  and  in  this  way  weakness  and  inefficiency  are  ex- 
posed. 

As  most  foundries  are  of  a  size  which  renders  personal 
supervision  by  an  executive  impossible,  the  only  reliable 
way,  therefore,  by  which  the  executive  can  judge  of  the 
efficiency  of  his  organization  is  through  a  system  of 
periodical  cost  and  statistical  reports.  These  reports  can 
only  be  accurately  obtained  when  a  good  cost  system  is 
in  operation.  Correct  cost  accounting,  properly  adminis- 
tered, is  a  prime  requisite  to  the  full  growth  of  any  busi- 
ness. 

To  the  foundrymen  who  have  profited  from  the  in- 
formation their  cost  systems  have  given  them,  the  writer 
urges  them  in  the  interest  of  their  industry  to  be  free  to 
point  out  to  their  competitors  that  a  well  developed  cost 
practice  has  enabled  them  to  price  their  product  intelligently 
and  to  increase  their  efficiency  because  it  has  helped  them  to 
know  more  about  their  business. 

Objections  to  Installing  a  Cost  System 

Foundrymen  who  have  not  installed  cost  systems 
ordinarily  have  a  number  of  reasons  for  not  doing  so. 
One  of  the  objections  is  the  feeling  that  exists  in  the  minds 
of  many  that  their  particular  business  is  so  unique  and  so 


22  FOUNDRY   COST  ACCOUNTING 

different  from  any  other  that  no  system  which  could  be 
operated  in  a  practical  manner  would  give  them  true  costs. 
It  is  unquestionably  true  that  some  lines  of  production  lend 
themselves  more  readily  to  the  determination  of  costs  than 
others,  but  it  is  also  true  that  no  line  is  so  complicated  but 
that  a  system  can  be  devised  and  operated  in  a  thoroughly 
practicable  manner  which  will  give  reasonably  accurate 
results. 

The  most  common  objection  is  that  of  the  expense  of 
operation.  Many  foundrymen  are  of  the  opinion  that  a 
cost  system  means  an  interminable  amount  of  detail  and  red 
tape  and  the  employment  of  a  number  of  additional  clerks. 
It  is  true  that  some  extra  labor  may  be  required,  but  not  to 
the  extent  that  most  foundrymen  believe.  There  is  in 
nearly  every  office  that  is  not  systematized,  and  where  costs 
of  production  are  not  determined,  sufficient  unnecessary 
work  done  to  cut  down  the  extra  labor  to  a  minimum.  In 
many  cases,  where  the  office  force  has  been  systematized, 
and  where  pay  roll  work  and  cost  work  have  been  unified, 
it  has  not  been  necessary  to  employ  any  additional  help 
at  all. 

Then,  there  is  a  certain  class  of  foundrymen  who  with- 
out any  cost  records  whatever  are  of  the  opinion  that  they 
know  what  their  castings  cost.  One  may,  from  their  knowl- 
edge of  the  work,  have  an  approximate  idea  of  what  their 
castings  cost  them  to  produce,  but  at  best  the  information 
is  no  better  than  a  guess  and  guesswork  is  always  unsafe 
and  poor  business  practice. 

Cost   System   an   Investment,    Not   an   Expense 

A  system  will  not  run  itself;  neither  will  it  in  itself 
reduce  costs  nor  increase  efficiency.  This  is  strictly  up 
to  the  foundryman  himself.  A  system  will  give  him  informa- 
tion, and  if  this  informtaion  is  properly  used,  he  will  un- 
questionably find  that  his  system  is  not  an  item  of  expense, 
but  a  very  valuable  investment. 


IMPORTANCE  OF  COSTS  23 

If  old  and  antiquated  equipment  is  replaced  by  modern 
equipment  before  the  old  is  worn  out  it  is  replaced  because 
it  is  expected  that  the  amount  expended  will  increase  profits 
either  from  a  reduction  in  costs  or  from  an  increase  in  pro- 
duction. Money  spent  in  this  way  is  considered  an  invest- 
ment and  not  an  expense.  Office  methods  have  been  im- 
proved to  quite  as  large  an  extent  as  has  foundry  equipment, 
and  an  investment  in  improved  office  methods  will  pro- 
duce a  return  just  as  great  as  an  investment  in  improved 
machinery. 


CHAPTER  II 

UNIFORM   COST   FINDING  METHODS  AND   THE 
EFFECT  ON  COMPETITION 

Fundamental  Principles  of  Accounting 

In  the  manufacture  of  castings,  uniform  cost-finding 
methods  or  fundamental  principles  of  cost  accounting  can  be 
laid  down  and  can  be  satisfactorily  followed  by  all  manufac- 
turers. There  are  no  essential  differences  in  the  processes  of 
manufacturing  castings,  whether  grey  iron,  malleable  iron,  steel, 
bronze,  brass,  or  aluminum,  that  distort  a  uniform  cost  prac- 
tice. Only  occasionally  does  one  find  local  conditions  that  are 
peculiar  to  individual  companies  and  it  is  rare  to  find  local 
conditions  that  materially  affect  the  introduction  of  uniform 
cost-finding  methods. 

An  examination  of  the  cost  accounting  systems  of  different 
foundries,  where  no  attempt  has  been  made  to  adopt  uniform 
methods,  shows  that  a  variety  of  widely  different  methods  are 
used  to  ascertain  the  cost  of  producing  castings.  This  is 
particularly  true  in  the  matter  of  determining  the  cost  of 
producing  different  patterns  of  castings,  the  cost  of  producing 
the  work  of  a  given  customer,  or  the  cost  of  particular  jobs. 
Cost  classifications  of  all  conceivable  arrangements  are  found 
while  hardly  any  two  companies  treat  the  same  elements  of 
cost  in  a  like  manner.  Important  and  appreciably  large  ele- 
ments of  cost  are  found  to  have  been  overlooked  entirely  by 
some  companies.  The  result  is  extremely  wide  differences 
in  costs  which  are  not  true  differences  but  differences,  to  a 
very  large  extent,  due  to  variation  in  methods  of  ascertaining 
costs.  It  is  a  condition  that  is  adverse  to  sound  trade  rela- 
tions and  to  the  best  interests  and  welfare  of  the  industry. 

Healthy  trade  conditions  throughout  the  foundry  industry 
demand  that  each  manufacturer  know  his  costs,  that  he  know 
his  profitable   and   his   unprofitable   work,   and   that   he   obtain 

25 


26  FOUNDRY   COST  ACCOUNTING 

a  fairly  uniform  profit  on  each  line  of  work  he  produces. 
Remember,  in  figuring  costs,  you  want  to  know  the  truth;  you 
want  to  ascertain  at  what  price  you  should  sell  your  product, 
and  the  danger  line  below  which  you  should  not  sell.  Intelli- 
gent competition  in  the  foundry  industry,  as  in  all  other 
industries,  depends  upon  a  general  knowledge  of  costs,  upon 
intelligent  estimates,  and  upon  each  member  of  the  industry 
arriving  at  his  costs  and  his  estimates  in  a  uniform  and 
similar  manner. 

Co-operation  in  Cost  Work 

Every  industry  has  problems  which  can  be  best  solved 
through  co-operation;  many  of  our  trade  problems  can  be 
solved  only  through  co-operation.  One  of  these  problems,  and 
an  important  one,  is  co-operation  in  securing  adequate  busi- 
ness information  through  the  adoption  of  standard  principles 
of  accounting  with  uniform  terminology  and  procedure. 

Obtaining  an  accurate  and  adequate  knowledge  of  costs 
of  production  throughout  an  industry  so  that  prices  can  be 
made  intelligently  is  a  most  important  and  commendable  phase 
of  co-operative  work,  and  one  that  has  proven  wonderfully 
productive. 

The  advantages  accruing  to  the  individual,  to  an  industry, 
and  to  the  public,  of  a  uniform  method  of  recording  and 
reporting  costs  are  many.  Where  methods  are  uniform,  costs 
can  be  compared  and  intelligently  discussed,  differences  can 
be  analyzed,  inefficient  methods  can  be  corrected,  waste  can  be 
eliminated,  costs  can  be  reduced  and  prices  can  be  made  in  an 
intelligent  manner.  The  benefits  to  be  derived  from  a  mutual 
education  and  knowledge  of  costs  of  production  and  distribu- 
tion are  twofold — economies  in  operation,  and  intelligence  in 
quoting  prices.  The  best  known  price  tonic  is  an  educated 
competitor. 

It  is  within  the  power  of  an  individual  business  man  to 
know  his  own  costs  of  production  and  the  prices  he  receives 
but  without  co-operation  and  the  interchange  of  cost  and  price 


UNIFORxM  COST  METHODS  27 

data  it  is  impossible  for  him  to  accurately  gauge  either  average 
costs  in  his  industry  or  general  market  conditions.  Market 
conditions,  so  far  as  price  is  concerned,  are  the  prices  com- 
petitors are  getting.  And  on  this  point  it  is  unfortunate  that 
false  reports  as  to  prices  quoted  by  competitors  are  so  widely 
current.  Often  false  price  reports  are  given  credence  and 
prices  are  met  which  never  existed.  This  practice  in  the  aggre- 
gate has  a  disastrous  effect  on  our  commercial  health.  The 
remedy  is  co-operation  which  insures  fair  and  honorable  com- 
petition. 

No  large  corporation  today  would  attempt  to  conduct  its 
business  without  a  comparison  of  costs  and  prices  at  different 
plants.  It  is  imperative  that  this  be  done  as  only  in  this  way 
can  the  relative  efficiency  of  the  different  plants  be  determined. 
If  inefficiency  is  disclosed  through  this  method  in  a  large  cor- 
poration, the  same  benefits  will  accrue  to  an  entire  industry 
by  the  use  of  similar  methods. 

The  time  has  come  when  it  is  realized  that  it  is  good  busi- 
ness to  extend  a  helping  hand  to  a  competitor.  If  he  can  be 
shown  ways  and  means  whereby  he  can  arrive  at  an  accurate 
knowledge  of  his  own  business,  the  whole  industry  is  bene- 
fited. An  intelligent  competitor  is  one  not  to  fear.  It  is 
the  unintelligent  competitor,  whose  only  weapon  is  a  cut  price 
based  on  ignorance,  who  is  so  disastrous  to  the  prosperity 
of  an  industry. 

Cost  Uniformity   Needed 

There  is  urgent  need  of  better  information  and  greater 
uniformity  in  a  number  of  the  branches  of  the  iron  and  steel 
industry.  In  certain  branches  of  the  foundry  industry  there 
are  a  multitude  of  cost  methods — nearly  as  many  methods  as 
there  are  foundries.  There  is  no  good  excuse  whatever  for 
such  widely  different  methods  and  practices.  Even  the  excuse 
of  small  sized  business  is  not  a  good  one,  for  uniform  account- 
ing does  not  mean  the  adoption  of  identical  books  of  account; 
it  does  not  mean  that  the  smallest  foundry  must  keep  as  an 


28  FOUNDRY  COST  ACCOUNTING 

elaborate  expense  classification  as  the  largest.  It  simply  means 
that  the  same  general  cost  divisions  be  followed,  the  same 
cost  units,  and  that  the  overhead  expense  be  distributed  on 
the  same  basis.  Costs  then  are  built  up  in  a  like  manner, 
and  when  this  is  the  case  it  is  surprising  to  see  how  small  the 
true  differences  in  costs  are.  By  far  the  greater  part  of  the 
big  differences  in  costs  we  hear  about  are  not  true  differences. 
They  arise,  to  a  very  large  extent,  from  differences  in  methods 
of  determining  costs. 

Intelligent  Competition  Depends  Upon  a  Knowledge  of  Costs 

There  is  a  certain  form  of  competition  to  which  the 
manufacturer  can  not  well  object,  and  that  is  the  competition 
of  the  man  who  knows  exactly  what  his  goods  cost  and  whose 
prices,  if  low,  reflect  advantages  actually  secured  through 
volume  or  by  reason  of  efficient  methods  of  production.  The 
form  of  competition  which  is  most  dreaded,  however,  is  that  of 
the  man,  who,  having  no  proper  knowledge  of  cost,  sets  prices 
which  preclude  the  possibility  of  there  being  an  adequate  profit 
in  the  business  for  anyone. 

This  question  of  costs  is  not  one  of  merely  academic 
interest.  It  is,  as  a  little  thought  will  show,  a  matter  of  real 
concern,  for  if  costs  are  to  be  utilized  to  the  greatest  extent 
as  price  and  profit  guides,  the  cost  of  each  product  must  be 
determined  sufficiently  accurately  to  reflect  its  individual  status 
as  a  profit  earner. 

The  manufacturer  of  today  faces  the  combination  of 
advancing  costs  on  material,  labor,  and  expense,  together  with 
keenest  competition  in  the  selling  end  of  the  business.  Under 
such  circumstances  prices  would  undoubtedly  be  only  reason- 
ably profitable  if  all  competition  were  based  on  an  exact 
knowledge  of  costs.  In  the  absence  of  such  knowledge  it  is 
not  surprising  that  conditions  are  far  from  desirable. 

From  the  standpoint  of  the  manufacturer,  the  adoption  of 
uniform  cost  methods  mean  the  survival  of  the  fittest,  or,  in 
other    words,    the    survival    of    the    efficient.      With    a    logical 


UNIFORM  COST  METHODS  29 

basis  on  which  to  operate,  and  the  knowledge  that  if  a  com- 
petitor is  underselling,  it  is  because  he  is  a  better  executive 
and  has  a  more  efficient  plant,  the  manufacturer  finds  himself 
with  something  tangible  to  work  upon.  It  then  behooves  him 
to  study  his  own  costs  and  determine  just  where  he  is  lacking. 
Sound  trade  conditions  and  living  prices  throughout  the 
foundry  industry  invariably  follow  in  the  wake  of  a  knowl- 
edge of  costs.  Where  costs  are  known  there  usually  is  a 
profit,  even  though  small,  in  every  product  manufactured.  This 
is  as  it  should  be  for  an  unwarranted  price  for  certain  work 
and  too  low  a  price  for  other  work  not  only  affects  the  success 
of  the  individual  company  but  it  has  a  marked  effect  on  com- 
petition and  one  that  is  decidedly  injurious. 

Weakness  of  the  Foundry  Industry 

The  steel  industry — rolled  steel  products — is  in  the  fore- 
ground when  it  comes  to  improved  accounting  methods  and 
business  practices.  Panics  and  depressions  have  given  way 
to  price  stability.  But  the  members  of  many  of  the  allied 
industries  are  very  lax  when  it  comes  to  knowing  what  their 
product  costs  them  to  produce,  and  they  are  consequently 
suffering  therefrom. 

It  is  entirely  safe  to  say  that  not  one-third  of  the  jobbing 
foundries  of  the  country  know  definitely  where  they  are 
making  money,  if  they  are  making  it,  or  where  they  are  losing 
it,  if  they  are  losing  it.  About  two-thirds  of  them  are  either 
guessing  or  their  costs  are  so  incomplete  and  unreliable  that 
the  information  is  no  better  than  a  guess.  It  is  a  condition 
that,  from  a  competitive  standpoint,  cannot  be  said  to  be  a 
healthy  one.  Their  ups  and  downs  in  the  past  attest  it.  Lean 
years  have  resulted  to  a  very  large  extent  from  foolish  prices 
based  on  foolish  costs. 

The  writer's  work  as  cost  accountant  of  the  Federal  Trade 
Commission  and  as  cost  accountant  of  the  American  Malleable 
Castings  Association  has  acquainted  him  with  the  profits  of  a 
great  many  foundries  and  he  can  state,  without  fear  of  contra- 


30  FOUNDRY   COST  ACCOUNTING 

diction,  that  the  companies  at  the  present  time  and  in  the  past 
that  know  and  have  known  their  business,  that  know  and 
have  known  definitely  their  profitable  and  their  unprofitable 
work  are  the  companies  that  are  making  and  have  made  the 
best  profit  showing.  There  are  a  few  exceptions,  but  as  a 
rule,  guessing  has  proven  poor  business,  and  the  proof  is 
the  showing  of  the  Profit  and  Loss  Account. 

Work  of  Trade  Associations 

Members  of  many  trade  associations  assemble  year  after 
year  to  listen  to  papers  of  great  technical  and  professional 
interest.  Matters  which  relate  to  the  prosperity  of  all  are  dis- 
cussed with  frankness  until  it  comes  to  the  word  "costs."  A 
lot  of  business  men  think  that  there  is  something  sacred  about 
costs  and  that  any  discussion  would  destroy  the  very  founda- 
tion of  their  business.  They  prdbably  will  discuss  a  great 
many  things  concerning  trade  conditions  but  the  real  thing 
which  concerns  the  permanence  of  their  investment  is  not 
discussed.  Each  man  continues  to  bid  for  business  largely 
upon  misinformation  and  in  actual  ignorance  of  general  con- 
ditions. In  other  words,  they  are  playing  the  game  blind- 
folded. Their  salesmen  send  in  reports  of  competitive  prices ; 
unscrupulous  buyers  give  them  hints  or  partial  information ; 
and  out  of  this  conglomeration  of  rumor,  report  and  part 
facts,   they  individually  and   severally  base  their   sales   policy. 

A  number  of  our  trade  organizations,  however,  are  work- 
ing along  sound  lines  and  are  rendering  a  valuable  service  to 
their  members  and  to  the  public.  My  observation  has  been  that 
the  associations  that  are  making  the  greatest  progress,  that  are 
accomplishing  the  most,  in  a  legitimate  way,  are  those  asso- 
ciations that  have  taken  up  cost  work,  plant  practices,  and  the 
exchange  of  ideas  and  experiences. 

It  has  been  my  pleasure  to  have  met  with  a  number  of 
trade  organizations  within  the  past  few  years  where  both  cost 
information  and  trade  views  and  experiences  were  exchanged 
most  freely,  and  there  is  no  question  as  to  the  benefits  accru- 


UNIFORM  COST  METHODS  3] 

ing  therefrom,  not  alone  to  the  individual  but  to  the  industry 
and  to  the  public.  It  appears  to  me  that  co-operative  work 
of  this  character  is  essential  to  the  economic  and  financial 
strength  of  our  industries  and  to  the  full  development  of  our 
domestic  and  foreign  trade. 

In  many  of  our  industries  certain  manufacturers  are,  and 
have  been  for  years,  interchanging  cost  data,  efficiency  methods, 
trade  views,  etc.,  and  the  result  has  been  unquestionably  bene- 
ficial to  every  participant.  If  certain  manufacturers  within  an 
industry  can  profit  from  an  interchange  of  ideas  and  operating 
results,  why  cannot  all  do  likewise  through  the  medium  of  their 
trade  association? 

Several  of  our  progressing  trade  associations  are  alive 
to  the  value  of  a  free  and  frank  exchange  of  experiences, 
operating  results,  views  and  observations  and  they  are  in  this 
way  strengthening  themselves,  they  are  protecting  their  cus- 
tomers, they  are  eliminating  trade  abuses,  they  are  bettering 
labor  conditions  and  keeping  labor  employed  more  steadily 
at  a  better  wage.  More  can  be  accomplished  through  uhe 
efforts  of  associations  in  establishing  fairness,  frankness,  and 
sound  business  policies  based  upon  adequate  business  informa- 
tion than  in  any  other  way. 

Better    Competitive    Spirit 

It  is  encouraging  to  know  the  change  of  heart  on  the  part 
of  business  men  that  has  taken  place  in  the  last  few  years. 
Distrust  is  giving  way  to  confidence.  Secrecy  is  yielding  to 
publicity.  Business  men  are  coming  out  in  the  open,  laying 
their  cards  on  the  table,  and  dealing  more  fairly  with  one 
another.  As  a  result,  competition  is  undergoing  a  change. 
Under  the  new  order  of  things,  forms  of  competition  are 
rapidly  changing.  The  relentless  suppression  of  the  weak 
and  the  triumph  of  the  strong  is  giving  way  to  competition  on 
terms  of  fairness  and  equality.  Laws  are  being  passed  to 
enforce  fair  and  just  competition.  Unjust  price  discrimina- 
tion, secret  rebates  and  the  like  which  profited  one  set  of  men 


32  FOUNDRY   COST  ACCOUNTING 

at  the  expense  of  another  are  things  of  the  past.  Newer 
and  more  modern  trade  practices  are  taking  their  places. 

Business  men  are  getting  a  broader  view  of  business  and  a 
more  comprehensive  grasp  of  industry  as  a  whole.  They  are 
not  centering  all  their  energy  and  attention  upon  their  own 
particular  establishment.  They  are  realizing  more  and  more 
the  fact  that  their  plant  is  but  a  part  of  a  great  industry,  and 
that  their  individual  welfare  depends  very  largely  upon  the 
welfare  and  progress  of  the  whole  industry  in  general. 

Both  business  men  and  the  Government  today  realize  that 
there  is  a  very  useful  field  of  co-operative  effort  among  busi- 
ness men  in  improving  cost  accounting  methods  and  business 
practices,  in  gathering  adequate  business  information,  in  the 
standardization  of  processes  and  products,  and  in  many  other 
phases  of  industrial  activity  which  tend  toward  more  complete 
information   and   greater  efficiency. 


CHAPTER  III 

EXAMINATION    OF   PLANT   PRACTICES   AND 
OPERATING  CONDITIONS 

Reasons  for  Examination 

While  the  fundamental  principles  of  cost  accounting 
throughout  the  foundry  industry  are  essentially  the  same 
and  are  applicable  to  all  foundries,  nevertheless,  in  almost 
every  plant  there  are  operating  conditions  that  are  peculiar 
to  that  particular  plant  which  have  a  direct  bearing  on  the 
methods.  For  this  reason,  when  a  foundry  adopts  literally 
a  cost  system  of  a  concern  manufacturing  a  similar  line  of 
product,  it  does  not,  as  a  rule,  work  out  satisfactorily. 

A  cost  system,  in  every  case,  should  be  made  to  fit 
the  operating  conditions  of  the  plant  and  not  the  plant  to  fit 
the  cost  system,  and  before  attempt  is  made  to  install  a  cost 
system  a  careful  examination  of  the  plant  practices  should 
be  made.  With  only  a  little  work  in  making  a  physical 
examination  of  plant  practices  and  operating  conditions  the 
fundamental  cost  accounting  principles  applicable  to  the  in- 
dustry can  be  readily  applied  to  any  foundry.  It  is  obvious 
that  if  a  complete  cost  system  is  installed  the  examination 
must  be  more  thorough  than  if  the  accountant  is  merely  to 
make  suggestions  for  improvement  in  existing  methods. 
However,  in  the  latter  event,  it  is  always  advisable  to  make 
a  fairly  close  examination  of  plant  operating  conditions. 
In  this  way  suggestions  for  improvements  that  are  imprac- 
ticable because  of  peculiar  plant  or  operating  conditions 
can  be  avoided. 

Raw  Materials 

An  examination  of  a  plant  should  begin  at  the  point 
of  receiving  and  storing  the  pig  iron,  fuel,  brick,  sand,  and 
other  raw  materials  and  supplies.     Special  attention  should 

33 


34  FOUNDRY  COST  ACCOUNTING 

be  given  to  the  method  of  unloading,  of  storing,  of  issuing 
same,  and  the  means  of  conveying  them  to  the  places  of  con- 
sumption. The  manner  of  issuing  materials  and  the  account- 
ing therefor  has  a  most  important  bearing  on  the  gathering 
and  on  the  accuracy  of  cost  information. 

If  a  stock  system  is  not  in  use,  and  if  carelessness  exists 
in  the  handling  of  materials  and  supplies  it  will  have  a  very 
decided  bearing  on  the  gathering  of  dependable  information. 
It  may  be  absolutely  necessary  that  the  plant  practice  in 
this  respect  be  corrected.  The  correction  would  be  the  use 
of  an  up-to-date  method  of  storing  and  issuing  supplies, 
namely,  the  stores  system,  for  there  is  no  place  in  the 
foundry  where  carelessness,  inefficiency  and  waste  are  more 
liable  to  exist.  Stock  is  only  another  form  of  money  and  the 
stores  system  bears  the  same  relation  to  stock  as  the  cash 
book  does  to  money  and  should  be  kept  with  the  same 
degree  of  care. 

Operating  Departments 

Step  by  step  each  stage  of  production  in  its  proper 
sequence  should  be  carefully  analyzed.  One  of  the  first 
things  to  be  taken  into  consideration  is  the  division  of  the 
plant  into  its  logical  operating  departments.  Each  depart- 
ment, as  far  as  possible,  should  be  restricted  to  a  single 
operation  in  order  that  departmental  costs  can  be  procured 
for  comparative  and  control  purposes.  Departmental  cost 
divisions  are  desirable  not  only  for  the  purpose  of  cost  com- 
parisons but  for  purposes  of  plant  economy  and  efficiency. 
They  afford  a  ready  means  of  locating,  for  inspection  and 
control,  any  unusual  or  abnormal  increase  in  cost. 

The  general  arrangement  of  the  operating  departments 
and  the  location  of  the  machinery  and  equipment  should  be 
noted  in  order  to  ascertain  the  extent  of  overlapping,  the 
use  of  machinery  and  equipment  in  common  by  two  or 
more  departments,  improper  routing  of  the  product,  etc. 
Special  consideration  should  be  given  to  the  use  of  tram- 


EXAMINATION  OF  PLANT  35 

ways,  industrial  tracks,  cranes,  etc.,  which  serve  two  or  more 
departments. 

Operating   Conditions 

Consideration,  as  affecting  cost  work,  should  be  given 
to  the  method  of  molding,  whether  bench,  machine,  or  floor 
molding  prevails ;  to  the  process  of  cleaning — tumbling,  sand- 
blasting, etc.;  to  the  facilities  for  determining  the  weight  of 
metal,  fuel,  and  flux  charged  into  the  furnace  or  cupola;  to 
methods  of  obtaining  weights  of  castings  finished  and  of 
those  shipped,  and  in  the  case  of  malleable  iron  castings, 
the  weight  of  hard  iron  castings,  as  well  as  the  weights  of 
finished  castings  and  of  those  shipped. 

Class  of  Product 

For  the  purpose  of  applying  cost  methods,  the  class  of 
product  or  classes  of  product  of  the  particular  concern 
should  be  carefully  noted.  This  will  determine  whether  it  is 
advisable  to  record  job  costs,  class  costs,  or  tonnage  costs. 
If  the  output  is  of  a  special  nature  the  cost  accounting  prin- 
ciples applicable  to  the  general  run  of  foundry  work  might 
have  to  be  modified  materially. 

In  addition  to  the  class  or  nature  of  the  product, 
information  should  be  secured  as  to  the  distribution  of 
production  and  of  sales  throughout  the  year  as  this  is  an 
important  cost  consideration  in  plants  producing  principally 
seasonal  products. 

Power,  Heat  and  Light 

The  general  arrangement  of  the  power  plant  and  the 
method  of  generating  power  should  receive  attention,  as 
well  as  the  consumption  of  power  by  the  different  operating 
departments.  Each  department  should  stand  the  cost  of  the 
power  consumed  by  it.  If  separate  motors  furnish  power  to 
the  machinery  of  the  different  departments  it  is  an  easy  mat- 


36  FOUNDRY   COST  ACCOUNTING 

ter  to  fairly  accurately  determine  the  department's  power 
consumption  without  the  use  of  department  meters.  In 
this  connection,  however,  the  few  foundries  that  have 
installed  department  meters  are  highly  satisfied  with  the 
results,  as  in  this  way  they  are  able  to  keep  an  accurate 
tab  on  the  power  consumption  and  thus  to  eliminate  waste 
as  well  as  affording  a  means  of  checking  the  measurement 
of  the  supply  company's  meter. 

The  matter  of  heat  and  light  requires  special  attention 
and  consideration  in  order  to  effect  an  equitable  depart- 
mental distribution  of  the  cost  thereof. 

Elimination  of  Waste 

Slightly  apart  from  the  introduction  of  cost  methods,  a 
watchout  should  be  kept  for  the  detection  of  possible  leaks 
and  the  possibility  of  increasing  plant  efficiency.  In  every 
foundry,  as  in  every  other  kind  of  business,  leaks  are  bound 
to  occur,  either  of  material,  supplies,  labor  or  expense.  If 
provision  is  made  for  statistics  to  show  the  amount  of 
material  necessary  to  do  certain  classes  of  work,  the  labor 
cost,  and  the  overhead  expense,  an  increase  in  any  of  these 
items  will  be  revealed  by  a  comparison  and  the  executive 
will  be  in  a  position  to  take  the  matter  up  for  investigation. 
It  is  hardly  necessary  to  say  that  after  a  few  of  those 
matters  have  been  taken  up  a  little  more  care  will  be 
exercised.  A  cost  system  with  forms  properly  designed  for 
giving  statistical  information  is  of  the  greatest  aid  to  plant 
efficiency. 

From  an  examination  and  discussion  of  plant  practices 
and  operating  conditions  that  have  a  bearing  on  cost  records 
it  is  sometimes  possible  to  offer  suggestions  of  value  per- 
taining to  wage  system,  plant  arrangement,  routing  of  the 
product,  avoidance  of  congestion  in  different  departments, 
handling  of  supplies,  etc.,  which  result  in  elimination  of 
waste  and  in  increased  Operating  efficiency. 


EXAMINATION  OF  PLANT  37 


Plant  Order 


One  may  think  that  the  order  in  which  a  plant  is  kept 
has  no  bearing  on  cost  work  but  it  has  a  great  deal  to  do 
with  the  successful  operation  of  a  cost  system.  To  satis- 
factorily collect  cost  data  there  must  be  a  recognized  order 
of  things  so  that  proper  and  accurate  records  can  be  kept. 

The  stocks  of  pig  iron,  fuel,  sand,  and  of  all  other  materials 
and  supplies  must  be  kept  in  as  good  an  order  as  possible 
so  that  accurate  charges  for  materials  used  can  be  made  as 
well  as  proper  credits  for  materials  returned  to  stock.  Any 
and  all  scrap  iron,  fuel,  brick,  bad  castings,  etc.,  should  be 
promptly  returned  to  stock  and  not  piled  where  it  is  con- 
venient to  do  so  without  any  means  of  keeping  track  of  it. 
"A  place  for  everything  and  everything  in  its  place,"  is  just 
as  essential  to  good  management  in  a  foundry  as  elsewhere. 


CHAPTER  IV 
INSTALLING    AND    OPERATING    A    COST    SYSTEM 

Co-operation  of  Management  Needed 

A  cost  accounting  system,  if  it  works  smoothly  and 
satisfactorily,  must  not  only  be  entirely  practicable  and 
co-ordinate  with  plant  practices  but  it  must  have  the  full 
co-operation  of  the  management.  When  the  introduction  of 
a  cost  system  is  regarded  with  suspicion  and  fails  to  receive 
the  co-operation  of  the  management  the  making  of  any 
appreciable  headway  is  up  hill  business.  In  order  to  pro- 
duce the  best  results  the  co-operation  of  the  whole  force  is 
needed,  particularly  that  of  the  superintendent  and  foremen. 
If  a  system  is  going  to  be  regarded  with  suspicion  and  criti- 
cism on  the  part  of  the  superintendent  and  foremen  and 
fails  to  receive  their  co-operation  it  is  useless  to  install  it. 
The  want  of  co-operation  has  resulted  in  the  abandonment  of 
many  an  excellent  cost  system. 

Foremen  very  often  look  upon  cost  finding  methods  as  an 
invasion  of  their  prerogatives  and  thus  fail  to  lend  any  aid 
in  carrying  out  the  part  they  should  play  in  the  systematic 
arrangement  of  work  and  in  the  gathering  of  information  that 
would  be  useful  to  them  as  well  as  to  the  management. 
Shortsighted  and  inefficient  foremen  are  exactly  right  in  their 
views,  as  a  cost  system  provides  a  reliable  means  of  examining 
their  work  and  measuring  their  efficiency  in  a  way  that  can- 
not be  done  by  personal  supervision  no  matter  how  careful 
and   thorough  the  personal   supervision  may  be. 

It  is  not  unusual  to  find  foremen  careless  with  tlie  use 
of  material  and  also  with  the  time  of  the  men.  Time  clocks 
often  show  that  men  were  present,  say,  1,000  hours  during 
the  week,  while  the  reports  of  time  spent  on  jobs  amount  to 
but  900  hours.  Wherever  time  slips  are  made  up  showing  the 
time  spent  on  different  operations  or  jobs  they  should  either 

39 


40  FOUNDRY   COST  ACCOUNTING 

form  the  basis  of  the  workman's  pay  or  else  be  reconciled 
with  the  time  clock  records.  In  gathering  costs,  and  in  keep- 
ing a  watchout  for  inefficiency,  the  cross  checking  of  time 
reports  and  clock  records  should  never  be  omitted,  and  if  a 
difference  exists  the  foreman  should  be  called  upon  to 
explain. 

Accounting  in  the  Foundry  Industry  Not   Difficult 

Cost  accounting  in  the  manufacture  of  castings  is  not 
difficult.  Not  nearly  as  difficult  as  in  most  manufacturing 
industries,  but  while  the  work  is  not  especially  difficult,  it 
is,  however,  more  than  an  office  boy's  task.  As  a  general  rule, 
the  foundries  that  are  keeping  costs  have  very  good  talent  in 
their  cost  department,  but  there  are,  on  the  other  hand,  a 
number  of  foundries  that  are  trying  to  get  along  with  in- 
efficient help,  help  that  is  neither  familiar  with  foundry  practice 
nor  with  cost  accounting  principles.  Efficient  help  in  the 
office,  as  in  the  plant,  is  the  cheapest  in  the  long  run.  It  is 
almost  futile  to  attempt  to  introduce  an  adequate  cost  system 
in  a  foundry  where  the  help  is  incapable  of  operating  it,  and 
this  is  very  often  t)  .  case  even  though  the  system  is  very 
elementary,  and  has  been  designed  with  the  end  in  view  of 
enabling  inexperienced  help  to  handle  it. 

In  devising  and  introducing  a  system,  it  is  always  a 
mistake  for  the  system  to  be  limited  to  the  cost  clerk's  capa- 
bility. It  should  always  be  founded  on  good  accounting  prin- 
ciples and  business  practices  and  should  provide  the  manage- 
ment with  the  information  it  needs  to  successfully  administer 
the  affairs  of  the  business. 

Modifying  an  Existing  Cost  System 

Nearly  every  foundry  gathers,  more  or  less  accurately,  a 
certain  amount  of  cost  information  and  has  records  with  which 
the  plant  is  familiar  that  generally,  with  minor  modifications, 
can  be  made  to  fit  in  and  form  a  good  part  of  the  information 
needed   to  build   up   an   accurate   detailed   cost.     The  task   of 


INSTALLING  A  COST  SYSTEM  41 

changing  over  an  existing  cost  system  to  conform  it  to  modern 
and  approved  methods,  or  to  uniform  principles  of  cost 
finding  adopted  by  an  industry,  is  ordinarily  not  at  all  a  difficult 
one,  and  the  time  required  to  do  so  is  surprisingly  little. 

In  modifying  an  existing  cost  system  the  principal  things 
are,  (1),  an  arrangement  of  the  cost  accounts  by  departments; 
(2),  a  proper  division  and  handling  of  direct  and  indirect 
charges;  (3),  a  seperate  overhead  rate  for  each  department, 
and  (4),  the  use  and  application  of  the  correct  method  of 
distributing  the  overhead  of  each  department.  While  these 
are  the  principal  considerations  yet  there  are  matters  of  less 
importance  that  have  an  indirect  bearing  on  the  accuracy  of 
the  cost  information  that  should  also  receive  attention,  such 
as  the  method  of  receiving  and  issuing  of  materials  and  sup- 
plies, the  form  of  pay  roll  records,  the  handling  and  distribu- 
tion of  inter-departmental  charges — power,  depreciation,  taxes, 
etc. — the  form  of  the  cost  records  and  of  the  cost  reports 
and  the  relation  of  the  general  accounts  to  the  cost  accounts. 

Expansion  of  Cost  Practice 

It  is  not  necessary  that  a  system  be  introduced  and  carried 
out  in  its  entirety  from  the  first.  If  it  is  founded  on  good 
accounting  principles  that  are  applicable  to  the  foundry  busi- 
ness it  can  be  developed  and  expanded  as  the  force  is  able  to 
handle  the  work  and  as  existing  conditions  make  an  expan- 
sion desirable.  For  instance,  in  introducing  a  system  in  a  plant 
that  is  not  accustomed  to  gathering  cost  data,  it  is  a  mistake 
to  undertake  too  much  from  the  start  in  compiling  job  costs. 
The  system  should  be  so  designed  that  the  cost  of  only  a 
few  of  the  more  important  jobs  or  classes  of  work  could  be 
had  without  in  any  way  interfering  with  the  successful  opera- 
tion of  the  system.  Then,  as  the  force  becomes  more  familiar 
with  the  work  and  adept  in  handling  it,  they  can  add  to  its 
scope  until  the  whole  field  of  cost  gathering  has  been  covered 
and  the  costs  of  the  entire  production  have  been  ascertained. 


42  FOUNDRY   COST  ACCOUNTING 

Avoidance   of   Unnecessary    Detail 

While  a  cost  system  should  be  fully  adequate  to  the  needs 
of  a  business  it  should  not  be  top  heavy.  All  unnecessary 
detail  and  red  tape  that  does  not  justify  itself  with  practical 
results  should  be  at  once  eliminated,  making  room  for  informa- 
tion that  can  and  will  be  used. 

In  almost  every  foundry  there  are  data  that  no  one  makes 
any  practical  use  of,  information  that  is  difficult  and  trouble- 
some to  collect,  and  in  the  form  in  which  it  is  made  up 
cannot  be  used  practicably  by  either  the  foundry  or  the  office. 
Needless  to  say,  all  such  information  should  give  way  to  that 
which  is  needed  and  which  is  practicable  to  use  for  it  is  rare 
to  find  a  foundry  but  what  could  make  good  use  of  a  greater 
amount  of  practical  information  than  it  possesses. 

A  very  common  mistake  in  cost  work  is  going  into  exacting 
refinements — carrying  out  small  items  of  cost  to  such  a  degree 
that  the  results  are  not  worth  the  time  spent  thereon,  and 
in  making  and  applying  to  each  item  of  cost  complicated  and 
varied  bases  of  distribution,  when  one  departmental  basis,  to  all 
practical  purposes,  gives  just  as  good  results.  A  foundry 
recently  visited  by  the  writer  was  using  three  bases  to  dis- 
tribute the  indirect  expense  of  the  molding  department  when 
a  single  basis  was  found  to  give  more  dependable  results  and 
would  thus  have  saved  two-thirds  of  the  time  spent  on  that 
particular  operation. 

Application  of  Cost  Principles 

A  theorist  should  not  be  entrusted  with  the  installation 
of  a  cost  system;  neither  should  a  practical  foundryman  unless 
he  is  well  grounded  in  the  principles  of  cost  accounting.  The 
practical  man  with  a  knowledge  of  accounting  usually  does  the 
better  work  because  he  has  constantly  in  mind  the  question, 
"Is  it  practicable?"  The  constant  aim  should  be  to  make  the 
system  thoroughly  practicable  in  its  operation.  It  is  possible 
to  determine  costs  with  a  great  degree  of  accuracy  but  it  is 
not  always  practicable  to  do  so.     A  lot  of  neatly  ruled  forms 


INSTALLING  A  COST  SYSTEM  43 

look  very  nice,  but  are  they  all  necessary  and  is  not  work 
being  done  that  serves  no  well  defined  purpose?  Every  figure 
that  has  no  practical  use  represents  a  loss.  A  great  part  of  the 
criticism  raised  against  cost  systems  is  because  of  their  im- 
practicability. Too  much  theory  is  used  in  designing  them  and 
too  little  common  sense  and  practical  experience. 

In  the  installation  of  a  cost  system,  considerable  skill 
is  required  in  applying  the  principles  to  the  conditions  as  they 
exist.  Almost  every  plant  has  peculiarities  that  have  a  direct 
bearing  on  cost  methods.  The  successful  installation,  there- 
fore, is  where  the  correct  principles  have  been  applied  to  the 
manufacturing  conditions  as  they  exist. 

Preparation  of  Reports 

In  the  preparation  of  cost  reports,  the  designer  of  them 
should  always  bear  in  mind  the  object  and  purpose.  The 
design  of  the  forms  necessarily  depends  upon  the  nature  of  the 
information  and  the  use  to  which  the  information  is  to  be 
put.  If  the  cost  information  is  for  the  purpose  of  measuring 
efficiency,  the  form  in  which  it  is  compiled  and  presented  will 
of  necessity  have  to  be  different  than  if  it  is  to  be  used  for 
quoting  prices.  The  former  is  largely  a  matter  of  arrang- 
ing the  data  for  comparative  and  analytical  purposes,  and  it 
may  comprise  only  the  operation  of  a  particular  department 
and  form  only  a  part  of  the  total  cost,  while  if  it  is  for  the 
purpose  of  quoting  prices,  the  information  must,  of  course, 
cover  the  total  production  and  selling  costs.  Usually,  the 
sales  management  is  interested  in  total  costs  only,  while  the 
plant  management  is  vitally  interested  in  detail  information 
for  analytical  and  comparative  purposes. 

The  completeness  of  the  information  for  the  use  of  the 
plant  management  depends,  of  course,  upon  the  completeness 
of  the  cost  system.  The  cost  system  should  be  sufficiently  com- 
plete to  enable  the  accountant  to  furnish  the  plant  manage- 
ment with  any  cost  information  needed.  A  well  arranged 
cost  report  serves  as  an  efficiency  key  which  gives  the 
management  positive  knowledge  of  the  facts  as  they  exist. 


44  FOUNDRY   COST  ACCOUNTING 

Design  of  Forms 

Forms  for  gathering  cost  information  should  be  designed 
with  the  view  of  collecting  just  the  information  that  is  desired, 
and  securing  it  with  the  least  disturbance  to  the  foundry  routine 
that  is  consistent  with  accuracy.  However,  in  designing  forms 
it  is  always  well  to  have  in  mind  possible  future  needs  and 
to  make  provisions  for  them  even  though  the  data  were  not 
especially  needed  at  the  time  the  form  was  designed.  Often 
too,  a  single  form  can  be  designed  with  a  view  of  collecting 
information  that  is  needed  or  can  be  used  for  two  or  more 
purposes.  When  this  can  be  done  it  is  nearly  always  advisable 
to  do  so  for  the  number  of  forms  in  use  should  be  kept  down 
to  the  minimum.  For  instance,  a  time  card  can  be  used  for 
cost  keeping  purposes  as  well  as  for  the  purpose  of  paying  the 
workman. 

Uniform  Forms  Not  Essential 

Uniform  cost  methods  do  not  require  the  keeping  of 
identical  forms  of  records  nor  the  preparation  of  statements 
in  a  similar  manner,  although  it  is  desirable  in  many  ways  that 
there  be  substantial  uniformity.  In  any  event,  the  forms 
of  records  and  of  statements  should  be  such  as  to  gather  and 
exhibit  the  results  with  the  minimum  amount  of  clerical  labor, 
and  with  a  ready  means  at  all  times  of  verifying  the  accuracy 
of  the  work. 

Cost  System  Should  Not  be  Independent  of  General  Books 

A  cost  system  should  not  be  merely  a  statistical  or  esti- 
mating system  and  operated  independently  of  the  general 
financial  accounts  but  should  form  a  direct  part  of  and  balance 
to  a  cent  with  the  books.  If  there  is  not  a  balance,  or  a 
reconciliation,  the  costs  of  production,  as  a  rule,  are  not 
dependable. 

The  starting  point  in  cost  determination  is  that  so  much 
money  has  been  spent  for  pig  iron,  sand,  and  other  material, 


INSTALLING  A  COST  SYSTEM  45 

so  much  for  labor,  and  so  much  for  overhead,  and  all  of  this 
must  be  accounted  for.  A  cost  system  is  merely  the  method 
of  following  these  expenditures  from  the  receipt  of  the  raw 
material  to  the  finished  castings,  and  the  accountant  whose 
costs  do  not  "tie  up"  with  the  ledger  is  in  danger.  The 
situation  is  analogous  to  that  of  a  paying  teller  who  fails  to 
balance  his  cash. 

The  argument  is  sometimes  met  that  a  cost  system  in  a 
foundry  cannot  be  balanced  with  the  books  because  it  is  neces- 
sary to  know  the  cost  of  certain  jobs  as  soon  as  they  are 
completed,  and  as  the  overhead  must  be  based  on  past  experi- 
ence the  costs  cannot  agree  with  the  books.  While  this  is 
true  in  a  sense,  it  is  also  true  that  any  method  of  arriving  at 
costs  in  advance  of  the  facts  is  not  a  cost  but  an  estimate. 
The  direct  labor  and  material  costs  may  be  actual  at  the  time 
the  job  is  completed  but  any  overhead  applied  previous  to  the 
close  of  the  month,  cannot  be  more  than  an  estimate.  The 
correct  overhead  chargeable  to  the  particular  job  cannot  be 
definitely  determined  until  all  the  expenses  for  the  month  are 
Obtainable  and  apportioned  over  the  various  jobs.  As  will  be 
explained  in  a  later  chapter,  direct  costs  should  be  applied 
directly  to  the  job,  and  the  actual  indirect  costs  for  the  month 
should  be  distributed  at  the  close  thereof  upon  the  best  obtain- 
able factor,  taking  into  consideration  that  the  factor  varies  with 
the  nature  of  the  expense. 


CHAPTER  V 
ACCOUNTING  PRACTICE  AND  RECORDS 

Introduction 

The  accounting  practice,  and  procedure,  pertaining  to  the 
purchase  and  recording  of  materials  and  supplies  and  the 
recording  of  labor  costs  will  now  be  taken  up  briefly.  Methods 
of  arriving  at  the  inventory  of  materials  and  supplies  on  hand 


PURCHASE  REQUISITION 

Department 

No 

Date 

To 

(Purchasing  Agent) 
Please  place  an  order  for  the  following  supplies: 

Quantity 

Description 

Signed  

47 


48  FOUNDRY  COST  ACCOUNTING 

for  purposes  of   determining  periodical  costs   when   the   stores 
system  is  not  in  use  will  also  be  described. 

Purchase  Requisition 

Under  the  "stores"  system,  the  stores  clerk  should  prepare 
purchase  requisitions  for  replenishing  stocks  of  foundry  sup- 
plies- He  will  be  guided  by  the  maximum  and  minimum  quan- 
tities to  be  carried  as  indicated  on  the  stock  record  cards  (see 
page  51).  The  minimum  quantity  is  the  limit  below  which  it  is 
not  safe  to  allow  the  stock  to  go  for  fear  of  exhaustion  before 
a  new  stock  can  be  acquired,  while  the  maximum  quantity  is 
the  limit  beyond  which  it  is  generally  inadvisable  to  go  either  on 
account  of  the  idle  capital  involved  or  deterioration  of  the  stock. 

Purchase  Order 

The  purchase  order,  as  the  -name  implies,  is  a  definite 
order  to  the  seller  for  the  purchase  of  supplies.  It  should  be 
made  out  in  triplicate,  the  original  copy  going  to  the  firm 
from  whom  the  material  is  purchased,  one  carbon  copy  going 
to  the  receiving  clerk,  the  other  carbon  copy  retained  by  the 
issuing  office.  A  serial  number  should  be  given  the  purchase 
order  and  the  company  from  whom  the  material  is  purchased 
should  be  requested  to  enter  the  number  of  the  purchase  order 
on  its  invoice  as  a  ready  means  of  identification. 

The  copy  of  the  purchase  order  going  to  the  receiving 
clerk  can  be  used  by  him  as  a  material  receiving  record.  This 
copy  should  be  made  with  a  short  carbon,  omitting  both  quantity 
and  price.  The  party  receiving  the  material  is  then  obliged  to 
count  or  measure  the  goods  received  and  thus  cannot  shirk 
his  duty  by  using,  without  verification,  the  quantity  figures  on 
the  purchase  order  in  reporting  to  the  office.  In  the  office,  the 
copy  with  the  material  received  notations  is  checked  against 
the  invoice.  If  this  practice  is  followed,  shortages  and  conse- 
quent overcharges  cannot  escape  detection. 


ACCOUNTING    PRACTICE    AND    RECORDS 


49 


Material  purchased  for  the  account  of  a  customer  should  be 
charged  directly  to  the  customer  and  not  taken  into  stock. 


PURCHASE  ORDER 

THE  A.  B.  FOUNDRY  COMPANY 

Cleveland,  0. 

No.. 
To Date 

Address 

You  are  hereby  authorized  to  furnish  the  following  material  to  be  shipped 
to via 

Quantity 

Description 

Price 

Place  our  order  number  on  all  invoices. 

The  A.  B.  Foundry  Company 

Per 

Invoices  From  Creditors 

Before  invoices  are  approved  they  should  be  carefully 
checked  with  the  purchasing  and  receiving  records  with  respect 
to  quality,  quantity  and  price.  The  mathematical  calculations 
should  then  be  verified.  To  make  sure  that  all  invoices  have 
been  properly  checked  before  they  are  passed  for  entry  and 
payment,  it  is  often   advisable  to  stamp   each  invoice  as  it  is 


50  FOUNDRY  COST  ACCOUNTING 

received  with  a  blank  form  for  recording  the  O.  K.  of 
the  parties  who  verified  the  quantity,  the  price,  and  the  exten- 
sions. 

Stores 

Only  a  small  proportion  of  the  foundrymen  of  the  country 
keep  within  a  separate  enclosure  the  numerous  operating  sup- 
plies that  are  required  in  a  foundry  and  have  an  orderly  system 
of  receiving,  storing  and  issuing  same.  It  is  a  phase  of  the 
plant  management  that  is  usually  lax  and  one  subject  to  a  lot 
of  abuse  with  consequent  leaks  and  inefficiency. 

When  the  subject  is  brought  to  the  attention  of  officials 
one  is  met  with  the  response  that  the  extra  expense  of  a  store- 
keeper would  not  be  justified.  The  expense  of  such  a  person, 
it  seems,  is  something  tangible  and  readily  grasped  while  the 
loss  from  theft,  carelessness,  and  the  loss  of  time  and  ineffi- 
ciency resulting  from  not  having  a  place  for  everything  and 
everything  in  its  place,  is  something  that  cannot  be  so  readily 
judged,  although  it  may  amount,  and  usually  does,  to  several 
times  the  expense  of  a  storekeeper,  assuming  that  the  entire  time 
of  a  storekeeper  would  be  required  which  is  rarely  the  case. 
As  essential  as  it  is,  the  proportion  of  foundries  that  have  an 
orderly  and  well  managed  storeroom  is  unfortunately  very 
small- 

The  smaller  foundries,  as  a  rule,  can  handle  their  stores 
in  an  orderly  and  efficient  way  without  incurring  any  appreciable 
amount  of  additional  expense.  If  it  is  the  practice  of  the  plant 
to  procure  supplies,  as  nearly  as  practicable,  at  a  stated  time 
or  times  of  the  day,  the  time  required  of  the  person  in  charge 
of  the  stores  is  reduced  to  a  minimum  and  often  one  of  the 
office  force  can  be  delegated  to  issue  the  supplies  without  entail- 
ing any  additional  expense  whatever. 

Broadly  speaking,  "stores"  in  a  foundry,  are  divided  into 
two  general  classes: 

1.     Raw  materials:     Pig  Iron,  Scrap,  Coal,  Coke,  Brick, 
Limestone,  Sand,  Lumber,  Etc. 


ACCOUNTING    PRACTICE    AND    RECORDS 


51 


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Maximum  Quantity 
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52  FOUNDRY  COST  ACCOUNTING 

2.     Supplies:     Facings,    Partings,    Shovels,    Riddles,    Oil, 

Waste,   Files,   Emery  Wheels,   Wire,   Etc. 
The  location  of   the  store   room  is  important.     It  should 
be  as  nearly  central  as  possible  so  that  it  will  be  equally  acces- 
sible from  all  parts  of  the  foundry. 

All  of  the  material  for  which  the  storekeeper  is  responsi- 
ble should  either  actually  or  constructively  pass  through  the 
store  room. 

Stores  Record 

Proper  records  should  be  made  of  the  receipt  of  mate- 
rial and  it  should  be  issued  only  upon  requisitions  signed  by 
a  department  foreman  regardless  of  whether  a  perpetual  in- 
ventory is  kept  with  each  kind  of  material.  When  it  is 
advisable,  as  in  most  cases  it  is,  to  run  a  perpetual  inventory 
with  each  kind  of  stock  carried  the  form  shown  on  the  preced- 
ing page  will  be  found  to  serve  the  purpose  well. 

The  chief  purpose  of  a  stores  system  is  that  of  having 
and  preserving  order  in  receiving,  storing  and  issuing  supplies; 
in  reducing  waste  from  extravagance  and  thefts;  and  finally, 
to  ascertain  the  cost  of  the  supplies  consumed  for  purpose  of 
arriving  at  periodical  costs  of  production. 

The  accuracy  of  stock  records  depends  in  a  very  large 
measure  upon  the  precautions  taken  to  prevent  any  but  prop- 
erly authorized  persons  from  removing  material  from  stock. 
No  material  should  be  allowed  to  be  taken  from  stock  with- 
out a  requisition  therefor  so  that  the  proper  record  can  be 
made- 

From  time  to  time  the  stock  records  should  be  verified 
by  actual  count,  weight,  or  measurement  so  that  any  discrep- 
ancy may  be  located.  Verifications  should  be  made  somewhat 
frequently   and   preferably   at   times    when    the    stock    is    low. 

Stores  Requisition 

For  the  purpose  of  ascertaining  the  supplies  consumed 
and  their  cost  the  following  simple  form  of  requisition  will 
suffice : 


ACCOUNTING  PRACTICE  AND  RECORDS 


53 


The  information  as  to  the  material  desired  and  the 
quantity  is  filled  in  by  either  the  workman  or  the  foreman 
and  the  requisition  is  signed  by  the  department  foreman  or 
superintendent  as  authority  to  issue  the  supplies- 


STORES  REQUISITION 

No 

Storekeeper: 

Date 

You  are  authorized  to  issue  the Department,  the  following: 

Material 

QUANTITY 

Price 

Amount 

Account 

TO    BE 

Charged 

Foreman Superintendent 

The  return  of  stock  to  the  storeroom  can  be  taken  care 
of  through  the  use  of  a  credit  slip,  or  preferably,  by  using 
the  same  form  of  stores  requisition  of  a  different  color. 
Where  practicable,  the  credit  slip  or  requisition  should  be 
attached  to  the  original  requisition  and  if  the  cost  of  the 
entire  material  withdrawn  has  been  charged  to  a  particular 
department,  or  job,  proper  credit  should  be  given  for  the 
material  returned.     At  the  end  of  the  month  the  office  sorts 


54  FOUNDRY  COST  ACCOUNTING 

the  cards  by  departments,  makes  the  extensions  and  a  recapitu- 
lation by  department  account  numbers.  "Stores"  account  is 
then  credited  with  the  total  cost  of  supplies  issued  and  the 
proper  cost  accounts  of  the  respective  departments  debited. 
The  above  requisition  will  be  found  to  serve  the  purpose 
for  cost  accounting  even  if  postings  to  a  stock  record  are 
not  made.  While  it  is  advisable  in  the  larger  foundries  to 
keep  stock  records  of  all  supplies  in  order  to  ascertain  the 
amount  on  hand,  it  is  not  so  essential  in  the  smaller  foundries 
that  a  perpetual  inventory  of  all  supplies  be  kept. 

Stores  System  Not  Essentially  Required  for  Cost  Account- 
ing Purposes 

The  fact  that  "stores"  are  not  kept  need  not  interfere  with 
the  full  and  proper  operation  of  a  cost  system  provided  that 
an  inventory  of  the  cost  of  the  supplies  on  hand  at  the  end 
of  the  month  can  be  obtained.  For  the  smaller  foundries,  the 
cost  of  supplies  on  hand  at  the  end  of  the  month  can  generally 
be  determined  by  the  inventory  method  with  a  fair  degree  of 
accuracy. 

Where  it  is  known  for  what  purpose  materials  are  pur- 
chased, supply  expense  columns  can  be  provided  for  in  the 
voucher  record  corresponding  to  the  departments  and  post- 
ings can  be  made  directly  from  the  Voucher  Record  to  the 
department    supply   accounts. 

It  is  often  the  case  that  supplies  purchased  for  one  depart- 
ment and  charged  to  that  department  will  be  used  in  part  by 
another  department.  This  situation  can  be  easily  taken  care  of 
by  a  system  of  transfer  slips  on  which  should  be  reported 
transfers  of  supplies.  These  slips  can  be  summarized  and  the 
cost  of  the  supplies  charged  to  the  department  using  them, 
crediting  the  department  from  which  they  were  transferred. 

The  cost  of  the  supplies  consumed  during  the  month  is 
then  arrived  at  by  taking  into  consideration  the  opening  and 
closing  inventories.  Under  the  inventory  system,  the  accuracy 
of  the  month's  cost  of  such  items  as  sand,  brick,  lumber  and 


ACCOUNTING    PRACTICE    AND    RECORDS  55 

foundry  supplies  which  are  usually  received  in  considerable 
quantities  is  contingent  upon  the  care  taken  to  ascertain  the 
stock  remaining  on  hand  at  the  end  of  the  month. 

Inventory  of  Pig  Iron 

To  arrive  at  the  quantity  of  pig  iron  on  hand  at  any 
time  and  its  cost  is  not  difficult.  It  is  usual  to  keep  a  perpetual 
inventory  of  iron  by  charging  the  account  with  the  quantities 
and  the  cost  of  receipts  and  crediting  the  account  with  the 
quantities  and  the  cost  of  the  iron  consumed-  The  quantity 
consumed  is  always  known  as  the  iron  is  weighed  as  it  is 
charged  into  the  cupola  or  furnace. 

It  is  a  general  practice  also,  particularly  among  malleable 
iron  foundries,  to  pile  separately  in  rows,  each  carload  of  iron, 
the  weight  of  which  is  of  course  known.  The  inventory, 
therefore,  can  be  determined  very  accurately  each  month  by 
listing  the  weights  of  both  the  unbroken  and  the  broken  lots 
and  deducting  the  weight  of  the  iron  used  from  the  broken 
lots.  A  number  of  foundries  determine  the  inventory  of  iron 
on  hand  at  the  end  of  each  month  in  this  way  with  very  satis- 
factory results. 

The  following  procedure  in  handling  and  recording  pig 
iron  will  insure  an  accurate  record  of  the  iron  on  hand  as 
well  as  the  cost  of  the  iron  consumed. 

1.  Pile  each  carload  separately. 

2.  Mark  the  pile  with  the  car  number,  thus  "B.   &  O. 

48620." 

3.  As    iron    is    taken    for   the    melt,    report    weight    and 

car  number. 

4.  At    end    of    month    compute    the   actual    cost    of    the 

iron    used,    i.    e.,    invoice    cost    with    freight    and 
unloading  labor  added. 

5.  Make  but  one  debit  and  one  credit  entry  to  Pig  Iron 

Account   monthly. 


56 


FOUNDRY  COST  ACCOUNTING 


6.     Check    and    reconcile    consumption    weight    of    each 

carload  of  iron  with  billed  or  invoice  weight. 
A  record,  in  the  following  form,  of  the  receipts  of  iron, 
invoice    cost,    freight    and    unloading   labor,    and    of    quantities 
consumed  of  each  carload  lot  will  be  found  to  be  convenient 
for  both  cost  accounting  and  inventory  purposes : 


RECORD  OF  IRON  CONSUMED 

Car  No. 

Weight 

Cost  per  Ton 

Used 

Invoice 
Cost 

Freight 

Unload- 
ing Lab. 

Total 
Cost 

Weight 

Month 

B.&O.  48620 

80,000 

$24.00 

$1.00 

$0.25 

$25.25 

60,000 
20,000 

Jan. 
Feb. 

PRR   41760 

60,000 

25.00 

1.20 

.25 

26.45 

10,000 
40,000 
10,000 

Jan. 
Feb. 
Mar. 

Inventory  of  Coke 

In  the  production  of  grey  iron  castings,  where  the  iron  is 
melted  in  a  cupola,  coke  is  almost  exclusively  used  as  a  fuel, 


ACCOUNTING    PRACTICE    AND    RECORDS  57 

and  it  is  the  practice  to  weigh  either  all  of  the  coke  charged 
into  the  cupola  or  to  make  frequent  tests  of  the  coke  consump- 
tion per  ton  of  iron  melted.  The  former  practice,  with  care  in 
weighing,  is  to  be  recommended  as  it  gives  accurate  consumption 
costs  and  reliable  inventory  information  at  all  times;  the  latter 
practice,  when  frequent  tests  are  carefully  made,  will  give  fairly 
satisfactory  results  in  arriving  at  the  cost  of  the  fuel  consumed 
as  well  as  the  inventory  on  hand. 

Inventory  of  Coal 

Coal  is  used  very  largely  as  a  melting  fuel  in  the  production 
of  malleable  iron  castings  as  an  air  furnace  is  used  to  melt  the 
iron  instead  of  a  cupola,  as  in  grey  iron  practice.  Coal  is 
also  generally  used  for  annealing.  In  the  malleable  iron  branch 
of  the  industry,  to  arrive  at  the  inventory  of  coal  in  order  to 
prepare  monthly  cost  statements  is  more  or  less  difficult  depend- 
ing up  the  practice  of  the  plant.  If  it  is  the  practice  to  store 
separately  melting  and  annealing  fuel  and  to  weigh  it  as  it  is 
used,  it  is,  of  course,  not  difficult  to  determine  monthly  inven- 
tories. When  the  coal  is  not  weighed  regularly  but  only  at 
times  when  practice  tests  are  made,  the  results  of  the  tests  can 
be  used  to  arrive  at  the  coal  consumed  and  the  inventory  on 
hand  with  fairly  satisfactory  results.  There  is  usually  little 
difficulty  experienced  in  malleable  iron  practice  in  arriving  at 
the  coal  consumption  by  departments  as  generally  different 
grades  of  coal  are  used  for  melting  and  for  annealing. 

Where  coal  is  handled  by  crane  it  is  not  usual  to  weigh 
each  individual  bucket  but  to  record  the  number  of  buckets 
charged  and  to  apply  thereto  the  average  bucket  weight.  As 
the  buckets  are  of  a  standard  size  and  can  be  fairly  evenly 
filled  the  application  of  an  average  weight  gives  very  satis- 
factory results. 

A  number  of  foundries  store  their  coal  in  bins  of  known 


58  FOUNDRY  COST  ACCOUNTING 

contents  and  determine  by  measurement,  the  inventory  at  the 
end  of  each  month. 

Inventory  of  Fire  Brick 

But  little  difficulty  is  encountered  in  determining  the  in- 
ventory of  fire  brick  as  the  quantity  on  hand  at  any  time  is 
not  ordinarily  large  and  as  they  are  subject  to  piling  in  a  way 
in  which  they  can  be  readily  counted. 

To  facilitate  recording  and  verifying,  each  carload  of  brick 
should  be  piled  separately  the  same  as  in  the  case  of  pig  iron. 

Inventory  of  Sand 

While  a  considerable  stock  of  sand  is  usually  carried,  the 
cost  is  not  great  as  the  commodity  is  a  cheap  one.  There- 
fore, even  if  a  monthly  inventory  can  not  be  had  with  exacting 
accuracy,  the  effect  is  not  serious. 

It  is  not  the  general  practice  to  either  weigh  or  measure 
sand  as  it  is  issued  to  the  foundry,  to  the  core  room, 
or  to  the  sand  blast  cleaning  apparatus,  although  some  do  meas- 
ure it  by  crane  buckets,  by  wheelbarrows,  or  otherwise.  The 
general  practice  makes  it  impossible  to  keep  a  perpetual  in- 
ventory record.  The  next  best  thing  then,  is  to  determine  the 
contents  of  the  sand  bins  and  ascertain  the  quantity  on  hand 
at  the  end  of  each  month  in  this  way.  This  method  will  be 
found  to  be  both  practicable  and  reasonably  accurate. 

Inventory  of  Partly  Finished  and   Finished   Castings 

The  cost  accounting  systems  of  certain  foundries  are 
designed  for  keeping  the  inventory  or  the  cost  of  castings  in 
process  as  well  as  the  cost  of  finished  castings  on  hand. 
Invariably,  considerable  difficulty  is  encountered  in  foundry 
practice  to  keep  an  account  of  the  cost  of  work  in  process  and 
of  the  cost  of  finished  castings  on  hand.  While  a  perpetual 
inventory  of  partly  finished  and  finished  work  is  thoroughly 
practicable  in  most  manufacturing  lines,  it  is  not  so  prac- 
ticable in  a  jobbing  foundry,  even  with  good  bookkeeping 
talent.  It  can  be  done,  and  a  few  are  doing  it,  but  at  the  expense 


ACCOUNTING    PRACTICE    AND    RECORDS  59 

of  a  lot  of  time  and  a  considerable  amount  of  uncertainty  as 
to  the  accuracy  of  the  results. 

The  most  practicable  manner  of  determining  the  cost  of 
the  inventory  of  partly  finished  and  finished  castings  at  the  end 
of  the  month  is  to  start  with  the  cost  of  the  physical  inventory 
at  the  beginning  of  the  year,  add  thereto  the  total  costs  of  pro- 
duction for  the  month  following  and  deduct  the  cost  of  the 
month's  shipments,  taking  as  the  cost  of  the  shipments  during 
the  month  the  average  cost  of  the  month's  production  of  finished 
castings.  The  cost  of  the  month's  shipments  can  nearly  always 
be  taken  at  this  figure  as  the  practice  of  foundries  is  to  ship 
work  promptly  and  the  accumulation  of  stock  is  rarely  of  any 
considerable  importance. 

Under  the  method  outlined  above  it  is  not  necessary  to 
keep  a  work  in  process  account  nor  an  account  with  finished 
castings  to  show  the  cost  of  those  shipped,  both  of  which  are 
the  two  most  troublesome  accounts  with  which  the  book- 
keeper has  to  contend. 

Annual  Physical  Inventory 

A  careful  physical  inventory  of  materials,  supplies,  partly 
finished  and  finished  work,  should  be  taken  at  least  once  each 
year.  Especially  designed  inventory  sheets  should  be  ruled  or 
printed  in  order  that  the  lists  may  be  made  out  methodically  and 
in  a  form  in  which  they  can  be  preserved. 

Inventory  time  is  essentially  a  season  when  facts  should  be 
looked  squarely  in  the  face.  It  is  poor  judgment  to  try  to 
fool  one's  self  as  to  the  state  of  their  affairs.  The  inventory 
should  be  taken  as  thoroughly  and  as  systematically  as  pos- 
sible and  when  the  task  is  ended  the  company  should  know 
exactly  where  it  stands. 

Basis  of  Physical  Inventory 

The  object  of  taking  a  physical  inventory  is  not  so  much 
to  ascertain  the  quantity  of  stock  on  hand  as  it  is  to  ascertain 


60  FOUNDRY  COST  ACCOUNTING 

its  value  in  order  to  arrive  at  how  much  profit  has  been  made 
through  the  conduct  of  the  business  during  a  certain  period 
of  time.  Therefore,  in  order  to  accurately  determine  the 
amount  of  profit,  the  inventory  must  be  taken  carefully  and  at 
cost,  and  not,  in  any  case,  at  market  value,  unless  the  market 
value  is  less  than  cost.  When  market  values  are  used,  when 
in  excess  of  cost,  profits  are  anticipated  to  the  extent  of  the 
difference  between  the  market  value  and  the  cost.  Anticipated 
profits  should  never  be  taken  on  the  books.  A  profit  should  not 
be  recorded  until  it  has  been  definitely  realized. 

Accounts  Payable  Voucher 

Every  foundry,  no  matter  the  size  of  its  operations,  as  a 
matter  of  safety,  should  employ  the  use  of  an  Accounts  Pay- 
able Voucher.  Its  purpose  is  to  provide  a  methodical,  reliable 
and  accurate  method  of  paying  invoices,  to  avoid  duplicate  pay- 
ments, to  indicate  to  the  creditor  the  invoices  which  the  par- 
ticular payment  covers,  to  furnish  a  means  of  providing  for 
a  complete  history  of  the  particular  transaction,  and  to  list 
and  classify  all  expenses  incurred,  whether  for  material,  labor, 
expense,  or  plant  additions.  The  voucher  is  the  first  step  to 
correct  and  dependable  accounting. 

The  form  should  provide  for  recording  the  number  of 
voucher,  date,  description,  amount  of  invoice,  allowances,  the 
invoice  or  invoices  which  the  payment  covers,  and  the  carbon 
copy  should  show  the  distribution  of  the  expense  by  account 
number.  This  distribution  forms  the  original  cost  accounting 
entry  and  is  the  basis  of  all  other  entries  and  classifications. 

It  is  still  the  practice  of  quite  a  few  companies  to  send 
the  voucher  to  the  creditor  along  with  the  check  for  signature 
as  evidence  of  the  receipt  of  payment,  but  the  better  practice 
is  to  retain  the  voucher  and  consider  the  endorsement  of  the 
check  as  a  sufficient  receipt. 

The  invoice  from  the  creditor  should  be  attached  to  the 
voucher  and  also  a  copy  of  the  purchase  order,  and  the  can- 
celled check  after  it  is  returned  from  the  bank.     A  complete 


ACCOUNTING    PRACTICE    AND    RECORDS  61 

history  of  the  purchase  transaction  can  then  be  had  from 
reference  to  the  voucher. 

A  separate  voucher  should  be  made  out  for  each  creditor 
but  not  for  each  invoice.  When  payments  are  made  monthly, 
and  there  are  several  invoices  from  a  given  creditor,  a  single 
voucher  should  be  made  out  covering  them  all. 

A  voucher  should  be  prepared  for  the  pay  roll,  attaching 
thereto  the  pay  roll  distribution. 

Likewise  a  voucher  should  be  prepared  for  withdrawals 
of  cash  to  cover  petty  cash  expenditures  for  the  month,  indi- 
cating thereon  the  classifications  of  the  expenses. 

All  vouchers  are  posted  to  or  entered,  according  to  the 
distribution  noted  thereon,  for  summarizing  purposes,  in  the 
voucher  record. 

Voucher  Record 

The  voucher  record  is  the  book  of  account  in  which  the 
accounts  payable  vouchers  are  entered  for  purposes  of  sum- 
marization. The  vouchers  are  entered  numerically  according 
to  date  of  issue. 

The  voucher  and  the  voucher  record  are  both  modern  labor 
saving  devices  and  are  big  time  savers  over  the  old  fashioned 
method  of  journalizing  and  individual  ledger  postings.  The 
saving  is  in  eliminating  the  necessity  of  keeping  individual 
ledger  accounts  with  creditors  and  in  making  individual  post- 
ings of  expense  items  to  the  ledger.  By  providing  a  column  for 
each  classification  of  expense,  postings  can  be  made  in  total 
at  the  end  of  the  month  and  at  the  same  time  the  voucher 
record  provides  a  control  of  accounts  payable,  inasmuch  as  the 
ag"gregate  amount  due  to  creditors  at  the  end  of  each  month 
is  always  known. 

The  form  of  the  voucher  record  varies  according  to 
whether  "Stores"  are  kept  and  material  and  supplies  for  cost 
purposes  are  issued  on  requisition,  or  whether  the  charge 
to  expense  is  made  when  the  material  is  received. 


62 


FOUNDRY  COST  ACCOUNTING 


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Left  hand  page                          VOUCHER    RECORD 

Date 

Vo. 

No. 

Favor  of 

Description 

Accts. 
Pay- 
able 

Date 
Paid 

Metal 

Melting              ) 

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VOUCHER  RECORD 

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General  Expense 

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ACCOUNTING    PRACTICE    AND    RECORDS 


65 


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CoREMAKING 

Cleaning  and.£hippinc< 

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32 

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36 

37 

38 

39 

41 

42 

43 

45 

46 

47 

48 

52 

55 

56 

57 

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VOUCHER  RECORD               Right  hand  page 

/  Blacksmith  Shop 

Fixed  Plant  Charges 

Sundry  Accounts 

b  122 

123 

125 

128 

138 

148 

158 

168 

178 

188 

198 

208 

Amt. 

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Acct.  Title 

66  FOUNDRY  COST  ACCOUNTING 

If  requisitions  are  issued  the  cost  of  the  materials  and 
supplies  used  can  be  arrived  at  in  this  way  and  there  is  no 
necessity  for  providing  for  sundry  departmental  supply  expense 
accounts  in  the  voucher  record.  In  case,  however,  requisi- 
tions are  not  issued  for  material  and  supplies  as  they  are  used, 
it  is  necessary  in  order  to  arrive  at  the  cost  of  the  quantities 
used  by  the  different  operating  departments,  to  provide  a  sup- 
ply expense  column  for  each  operating  department,  or  for  each 
class  of  materials  and  supplies,  in  which  all  purchases  are 
entered.  The  inventory  at  the  beginning  of  the  month,  plus 
the  purchases  during  the  month,  less  the  inventory  at  the  end 
of  the  month  gives  the  cost  of  the  supplies  consumed  during 
the  month. 

The  preceding  form  of  voucher  record  is  suitable  for  a 
foundry  where  materials  and  supplies  are  not  issued  on  requisi- 
tion. If  the  "Stores"  system  is  employed  and  requisitions 
issued,  the  accounts  under  each  operating  department  for 
materials  and  supplies  can  be  omitted,  having  in  their  stead  two 
or  three  controlling  accounts  only.  The  account  numbers  cor- 
respond with  those  used  in  the  classification  of  accounts  shown 
on  page  128. 

The  big  advantages  of  the  use  of  a  voucher  record  are 
that  it  dispenses  with  keeping  ledger  accounts  with  creditors 
and  that  it  classifies  expenditures  with  but  one  posting 
monthly  for  each  expense  account  for  which  a  column  is 
provided. 

At  the  end  of  the  month  the  total  of  the  column  marked 
"Accounts  Payable"  is  posted  to  the  credit  of  that  account 
in  the  general  ledger.  The  account  at  the  end  of  the  month, 
after  it  is  debited  in  total  from  the  cash  book  with  payments 
to  creditors,  and  discounts  taken,  will  show  the  aggregate  of 
accounts  payable. 

The  totals  of  each  operating  expense  column  are  posted 
monthly  to  the  debit  of  the  respective  columns  in  the  general 
ledger. 

There  will  be  no  entries  in  the  departmental  fixed  plant 
charges  accounts  28,  38,  48,  58  and  68,  except  through  transfers 


ACCOUNTING    PRACTICE    AND    RECORDS  67 

at  the  end  of  the  month  from  accounts  108,  118,  128,  138,  148, 
158,  168,  178,  188  198  and  208.  In  these  latter  accounts  will 
be  entered  the  fixed  plant  charges  as  they  are  incurred  irre- 
spective of  departments.  Then  at  the  end  of  the  month  the 
proper  departmental  distribution  will  be  made  and  the  former 
accounts  charged  and  the  latter  ones  credited  in  red,  thus 
balancing  them.  The  advantage  in  making  the  transfer  on  the 
Voucher  Record  is  that  the  book  then  shows  total  departmental 
costs. 

Under  the  column  "Sundry  Accounts"  will  be  entered 
expenditures  pertaining  to  property  accounts,  plant  additions, 
etc.,  and  not  expenditures  incurred  in  connection  with  opera- 
tions. 

Pay  Roll 

In  preparing  a  pay  roll  two  objects  should  be  constantly 
borne  in  mind;  namely,  to  arrive  at  the  correct  earnings  of 
the  workmen  during  the  pay  period,  and,  to  classify,  for  cost 
accounting  purpose,  the  earnings  in  a  way  in  which  the  labor 
costs  by  departments  can  be  obtained.  The  two  objects,  at 
the  same  time,  can  be  attained  very  easily  if  the  pay  roll 
record  is  properly  designed. 

Whether  the  pay  period  is  one  week,  two  weeks,  or  a 
month  is  not  material  in  cost  work.  However,  where  monthly 
statistics  are  prepared,  as  they  should  always  be,  the  prepara- 
tion of  the  monthly  statements  is  greatly  facilitated  if  the  pay 
periods  correspond  to  the  period  covered  by  the  statement.  This 
saves  the  work  of  splitting  the  labor  cost  shown  by  the  pay 
roll.  Pay  periods  should  not  be  every  two  weeks  but  twice 
a  month  instead. 

The  following  form  of  pay  roll,  which  is  designed  to 
classify  the  labor  costs  by  department  account  numbers,  will 
be  found  to  be  a  convenient  one. 

If  the  pay  period  is  the  first  half  of  the  month  a  line  is 
drawn  through  the  numbers  16  to  31,  and  if  the  pay  period  is 


68 


FOUNDRY  COST  ACCOUNTING 


ACCOUNTING    PRACTICE    AND    RECORDS  69 

the  second  half  of  the  month  a  line  is  drawn  through  the 
numbers  1  to  15. 

Names  of  the  workmen  and  their  numbers  are  filled  in  at 
the  office  after  which  the  sheets  are  turned  over  to  the  fore- 
men of  the  respective  departments,  a  sheet  for  each  department. 
The  five  divisions  into  which  each  man's  space  is  divided 
is  for  recording  the  time  spent  on  work  for  other  departments, 
the  department  being  indicated  by  the  department  labor  account 
number.  The  columns  to  the  right  are  for  distribution  of  the 
time  by  departments  which  is  made  in  the  general  office,  the 
department  labor  account  numbers  in  the  distribution  columns 
corresponding  with  the  department  labor  account  numbers 
entered  by  the  foreman. 

Tk*2  time  and  earnings  of  all  workmen  should  be  carried 
to  the  pay  roll,  including  molders  and  coremakers,  the  total 
of  which  then  gives  the  full  amount  of  the  entire  plant  pay  roll. 

For  recording  the  time  and  earnings  of  molders  and  core- 
makers,  however,  a  different  ruling  of  sheet  should  be  used. 
The  form  of  the  sheet  should  be  such  as  to  record  the  molding 
and  coremaking  direct  labor  costs  by  pattern  numbers  or  job 
numbers  as  well  as  to  arrive  at  the  total  earnings  of  the  em- 
ploye. Forms  of  molders'  time  sheets  are  shown  on  pages  84 
and  86  and  of  coremakers'  time  sheets  on  pages  100  and  101. 

Pay  Roll  Distribution  Sheet 

From  the  pay  roll,  which  indicates  the  labor  cost  by  depart- 
ment labor  account  numbers,  the  results  by  account  numbers 
are  carried  to  a  pay  roll  distribution  sheet.  A  voucher  is  then 
made  up  for  the  total  amount  of  the  pay  roll  to  which  the 
pay  roll  distribution  sheet  is  attached  for  purposes  of  making 
the  proper  classification  in  the  voucher  record. 

The  pay  roll  distribution  sheet  should  carry  all  of  the  labor 
accounts  provided  for  in  the  classification  of  accounts.  It  is 
advisable  to  have  the  account  numbers   and  titles   printed   in. 


70 


FOUNDRY  COST  ACCOUNTING 


PAY  ROLL  DISTRIBUTION  SHEET 

Period  Ending 19 . 


Acct. 
No. 


Total 


Title  of  Account 


No.  of  Em- 
ployees 


Hours 
Worked 


Amount 


ACCOUNTING    PRACTICE    AND    RECORDS 


71 


Record  of  Employees 

It  is  the  general  practice  of  most  manufacturing  companies 
in  other  lines  of  business  to  keep  a  ready  reference  record  of 
past  and  present  employees,  their  name  in  full,  nationality,  birth 
date,  single  or  married,  occupation,  date  employed,  date  left, 
rate  of  pay,  etc.  In  the  foundry  industry,  however,  only  a  very 
few  companies  keep  a  record  of  their  employees  and  the  absence 
of  information  of  the  above  nature  is  often  badly  felt. 

The  following  simple  card  filed  alphabetically,  can  be  used 
by  a  foundry  with  good  results : 


RECORD  OF  EMPLOYEES 

Name                                                                                        Number 

Married 
Address                                                                                        Single 

Date  of  Birth                              Nativity                                 No.  in  Family 

Occupation                                 Dept. 

Date  Employed 

Rate 

Date  Left 

Rate 

Remarks 

Employe's  signature 

CHAPTER  VI 

OPERATING   DEPARTMENTS 

and 

DEPARTMENT  RECORDS 

Introductory 

Practically  every  manufacturing  business  is  run  by  depart- 
ments, and  business  men  can  better  appreciate  the  importance 
of  cost  records  when  the  accounting  structure  is  arranged  to 
show  how  the  departments  compare  one  with  another  as  to 
operating  results,  expenses  and  efficiency.  Cost  records  that 
do  not  follow  proper  departmental  lines  do  not  serve  the  full 
purpose  for  which  they  are  intended. 

In  a  foundry,  the  operations  naturally  divide  themselves 
into  the  following  departments : 

Melting. 

Molding. 

Coremaking. 

Cleaning. 

Trimming  and   Inspecting. 

Annealing. 

Finishing. 

Shipping. 

The  operations  in  each  department  will  be  described  briefly 
as  well  as  the  forms  commonly  used  to  record  the  departmental 
operations. 

While  a  sharp  departmental  line  can  be  drawn  with 
respect  to  most  expenses,  yet  in  every  foundry,  as  in  every 
business,  there  are  certain  operating  expenses  such  as  power, 
heat  and  light,  depreciation,  taxes  and  insurance,  that  have 
to  be  divided  departmentally  more  or  less  arbitrarily.     Meth- 

73 


74  FOUNDRY  COST  ACCOUNTING 

ods    of    distributing    such    expenses    are    shown    in    Chapter 
VII  as  well  as  convenient  forms  for  showing  the  distribution. 

Melting  Department 

The  melting  department  of  a  foundry  is  that  part  of 
the  plant  in  which  the  iron  is  melted-  In  a  grey  iron  found- 
ry, it  is  the  cupola,  in  a  malleable  iron  foundry  and  in  a 
steel  foundry,  the  melting  furnace. 

The  use  of  a  cupola  in  the  manufacture  of  malleable 
iron  castings  is  practically  obsolete,  it  having  been  replaced 
by  the  air  furnace — both  natural  and  forced  draft — and 
the  open-hearth  furnace.  The  uncertainty  of  the  results 
obtained  by  cupola  melting  makes  the  air  furnace  prefer- 
able for  the  manufacture  of  malleable  iron  castings,  although 
the  cost  of  melting,  both  as  far  as  fuel  consumption  and 
repairs  and  maintenance  are  concerned,  is  very  much  less 
in  the  cupola  than  in  either  the  air  furnace  or  the  open- 
hearth   furnace- 

In  addition  to  the  cupola  or  furnace,  as  the  case  may  be, 
the  melting  department  should  include  all  equipment  and 
shops  that  serve  the  cupola  or  furnace,  such  as  the  black- 
smith shop  for  repairing  grate  bars,  pokers,  etc. ;  the  labora- 
tory for  analyzing  the  iron  and  testing  the  product;  the  slag 
mill  for  separating  the  iron  from  the  slag,  etc. 

Departmental  Line 

The  departmental  line  for  cost  determining  purposes  is 
delivering  the  molten  metal  at  the  spout  of  the  cupola 
or  furnace  into  the  ladle. 

The  costs  of  the  melting  department  include  all  mate- 
rial, other  than  iron,  used  in  melting,  and  all  costs  of  handling 
the  material — iron,  coke,  coal,  fuel  oil,  flux,  etc. — from  point 
of  storage  to  furnace  or  cupola,  as  well  as  the  costs  of  repairs, 


DEPARTMENT  RECORDS  75 

insurance,     taxes,    and     depreciation     on     the    melting    equip- 
ment. 

Record  of  Heats 

A  record  of  each  charge  or  heat  should  be  kept  show- 
ing the  weight  of  metal  charged,  scrap  recovered,  weight  of 
good  castings,  melting  loss,  weight  of  fuel  used  and  ratio 
to   metal   charged. 

The  following  form  of  daily  heat  report  will  give  the 
plant   manager   a   summary   of    the   heats    with    their    results: 


DAILY  HEAT  REPORT 

Date 

19.. 

Metal  Charged: 

Pounds 

Pounds 

Pig  Iron 

36,000 

Foreign  Scrap 

4,000 

Home  Scrap 

10,000 

Total  Metal  Charged 

50,000 

Less  Scrap  Returned 

12,000 

Total  Weight  to  be  accounted  for 

38,000 

Total  weight  good  castings 

33,000 

Melting  Loss 

5,000 

38,000 

Coke  Used                             10,000  lbs. 

Per  ton  of  metal  charged           400  lbs. 

Blacksmith  Shop 

The  greater  part  of  the  work  done  in  the  blacksmith 
shop  is  for  the  melting  department  and  the  molding  depart- 
ment, and  it  is  not  difficult  to  charge  the  costs  of   operating 


76 


FOUNDRY  COST  ACCOUNTING 


it  to  the  department  getting  the  benefit  of  the  work  and  this 
should  be  done  in  every  case. 

The  following  form  of  record  will  answer  both  for  a 
time  record  of  the  employee  and  for  a  cost  classification 
record : 


BLACKSMITH  SHOP 

Shop  Order  No 

Name  of  Workman Date 19 .  . 

Nature  of  Work 

No. 

Made 

Kind  of 
Matr'l 
Used 

Q'n'ty 

of  M't'l 

Used 

Hours 
Worked 

Labor 
Cost 

Mate- 
rial 
Cost 

Acct. 

to  be 

Charged 

— 

— 

— 

Correct 

FOREMAN 

The  workman  records,  or  it  is  recorded  for  him,  the 
nature  of  the  work  on  which  he  is  engaged,  the  amount  of 
work  he  turned  out,  the  kind  of  material  used  and  the 
time  during  which  he  was  engaged.  A  separate  ticket  is 
made  each  day.  The  cards  can  be  used  for  pay  roll  purposes 
and  for  purposes  of  cost  classification  of  both  labor  and 
material,  the  account  number  being  indicated  in  the  last 
column. 

Slag  Mill 

The  slag  mill  operations  call  for  no  separate  records 
or  reports.     The  operating  costs,  however,  should  not  be  mixed 


DEPARTMENT  RECORDS 


77 


M 

C 

cd 

C/D 
i— i 
(72 

3 

£ 

M 

o 

►J 

< 

z 

Ph 

< 

—    3 

C/3 

co'eL 

H 
to 

d 

o 

g 

o 

W 

X 

C/3 

u 

oil 

G 

Q 
* 

CO 

C/3 

rt 

2 

o 

i* 

O 

8 

< 

E 

\M 

< 

*3  p 

w 

CO 

CO'cL 

CO 

e* 

* 

o 

i 

l-H 

c/5 

% 

C/3 

c«.  O 

§ 

W^ 

t* 

-CO 

>-i 

'S  2 

o 

:>  o 

>    (X 

& 

Pile 

Num- 
ber 

tJ 

c 

rt 

la 

CQ 

Car 

Num- 
ber 

U-       1     —■ 

<u 

rt 

P 

- 

78  FOUNDRY  COST  ACCOUNTING 

with  other  melting  cost  items.  It  is  important  that  all  of 
the  operating  expense — labor,  repairs,  depreciation,  etc. — be 
treated  as  an  expense  of  the  melting  department  and  not  as 
a   general   overhead   expense. 

Laboratory 

It  is  not  all  foundries  that  look  upon  their  laboratory 
expense  as  an  expense  of  the  melting  department,  but  neverthe- 
less there  is  where  it  belongs  whether  the  work  is  analyzing 
iron  or  analyzing  and  testing  the  finished  product.  Experi- 
mental laboratory  work,  however,  is  of  a  different  nature 
and  is  more  properly  treated  as  a  special  cost  item. 

A  record  of  the  analysis  of  each  car  of  iron  should 
be  kept  and  the  form  shown  on  page  77  will  be  found  to  be 
a   convenient   one    for   that   purpose. 

Molding  Department 

The  molding  department  of  a  foundry  is  not  only  that 
part  of  the  plant  in  which  the  molds  are  made  but  the  shops 
directly  serving  the  molders,  such  as  Pattern  Shop,  Carpenter 
Shop,  etc.,  and  the  term  "molding  cost,"  properly,  embraces 
all  the  direct  and  indirect  costs  of  molding,  the  costs  of 
operating  the  pattern  shop,  carpenter  shop  and  all  other  shops 
serving  the  molders  or  the  molding  department 

The  breaking  or  the  cutting  of  gates  should  be  considered 
an  expense  of  the  molding  department.  In  the  production 
of  grey  iron  and  malleable  iron  castings,  the  gates,  risers  or 
feeders,  are  broken  off  by  hand,  while  in  the  production  of 
steel  castings  they  have  to  be  cut  off,  usually  a  power  cutting 
machine  being  employed.  The  costs  of  operating  the  cutting 
machines — labor,  supplies,  power,  repairs  and  depreciation — 
should  be  separately  shown,  but  as  far  as  a  cost  distribution 
is  concerned  they  should  be  treated  as  a  molding  department 


DEPARTMENT  RECORDS  79 

indirect    expense-     It    is    not    ordinarily    practicable    to    treat 
these  costs  as   direct  charges. 

Departmental  Line 

The  departmental  line  for  cost  determining  purposes 
is  when  the  castings  with  gates  removed  have  been  delivered 
to  the  Cleaning  Department,  and  the  scrap  returned  to  the 
furnace  or  stockpile. 

Production  Order 

Prompt  and  efficient  service  is  generally  recognized 
as  directly  contributing  to  success  in  the  industry.  This 
being  the  case,  it  is  highly  important  that  there  is  an  efficient 
system  of  handling  orders  and  correspondence  pertaining 
thereto. 

The  medium  ot  handling  orders  and  tracing  pro- 
duction is  the  "production  order.".  Upon  the  receipt  of  an 
order  from  a  customer,  a  production  order  should  be  made 
out  for  the  guidance  of  the  plant  management  and  as  a 
means  of  readily  tracing  or  locating  the  work  in  the  foundry. 
The  order  should  be  numbered  serially,  thus  affording  a 
ready  means  of  identifying  the  work  in  any  stage  of  produc- 
tion, and  show  as  well  the  customer's  order  number,  the  date 
of  issue,  the  name  of  the  customer,  the  pattern  number  and 
the  number  of  pieces  ordered  of  each  pattern.  About  six 
copies  should  be  made  of  the  order.  The  original  should  be 
retained  in  the  office;  a  copy  should  go  to  the  pattern  clerk 
as  his  instructions  to  get  the  pattern  off  of  the  shelf  and 
to  fill  out  the  production  order  tag  which  he  attaches  to  the 
match,  which  is  then  laid  out  preparatory  to  starting  produc- 
tion (if  it  is  a  new  job  an  order  should  be  issued  to  the 
patternmaker  as  authority  to  make  the  patterns) ;  a  copy 
should  go  to  the  coreroom  foreman  for  the  production  of  the 
cores  if  the  job  takes  cores;  a  copy  should  go  to  the  foundry 
foreman  as  his  information  in  assigning  work;  a  copy  should 


80 


FOUNDRY   COST   ACCOUNTING 


go  to  the  trimming  and  inspecting  room  foreman  for  his 
information  as  to  what  is  coming  through  the  plant;  and 
a  copy  should  go  to  the  finishing  and  shipping  room  foreman 
with  shipping  instructions. 

A    production    order    form    is    shown    below: 


Customer 


PRODUCTION  ORDER 

Shop  Order  No. 


Customer's  Order  No 
Delivery 


Date, 


No.  OF 
Pieces 


Pattern 
Number 


Description 


Remarks 


Issued  by. 


General  Manager 


Production  Order  Tag 

A  production  order  tag,  referred  to  above,  is  made  out 
by  the  foundry  or  pattern  clerk  from  the  information  contained 
on  the  production  order,  and  attached  to  the  pattern  prepara- 
tory to  turning  over  to  the  molder  to  run.  The  tag  is  for 
the  purpose  of  informing  the  molder  of  the  pattern  number, 
the  number  of  molds  he  is  to  make,  and  the  price  per  mold 


DEPARTMENT  RECORDS 


81 


he  is  to  receive  for  molding.  When  the  required  number  of 
molds  have  been  made  the  tag  is  again  attached  to  the  pat- 
tern and  returned  with  the  pattern  to  the  pattern  clerk. 

The   following  is  a  good   form   of   production  order  tag: 
PRODUCTION  ORDER  TAG 


Date  Ordered                                    Order  No. 

Customer 

Pattern  No. 

No.  Pes.  ordered 

No.  Pet.  in  ir.oli 

No.  irolds 

Priee  per  mold 

Wei(hl 

) 

Molder's  Name 

z 

Date  in  sand                                    Date  finished 

1 

CO 

Castings  made  over  this  order  will  not  be  paid  for. 
Return  this  tag  with  pattern. 

Molder's   Daily   Production   Card 

Each  day  the  molder  is  given  a  production  card  on  which 
he  records,  or  it  is  recorded  for  him  by  the  foundry  clerk, 
his  number,  his  name,  the  date,  the  pattern  number  on 
which  he  is  working,  the  number  of  molds  poured,  pieces 
in  a  mold  and  the  number  of  hours  spent  in  molding. 

A  card  form  is  shown  on  the  following  page. 

The  card  at  the  close  of  the  day  is  handed  in  or  collected 
by  the  trimming  room  clerk  who  later  enters  on  the  card, 
from  the  trimmer's  count,  the  number  of  pieces  good,  the 
number  of  pieces  broken  or  core  blown,  and  the  number 
of  pieces  bad.  The  card  is  made  out  in  duplicate,  one  copy 
of  which  goes  to  the  molder  and  is  retained  by  him  for  his 
information  and  the  other  copy,  after  the  weight  is  entered, 
is  turned  in  to  the  general  office  where  the  data  is  summarized 
on  a  Molder's   Summary  Production   Card. 


82 


FOUNDRY  COST  ACCOUNTING 


MOLDER'S  DAILY  PRODUCTION  CARD 

Molder's  No Name Date 19 

Pattern  No. 

Molds 
Poured 

Pieces 

in  Mold 

Pieces 

Pounds 
Good 

Hours 
Molding 

Balance 
Due 

Good 

Broken 
or  Core 
Blown 

Bad 

X23 

90 

2 

160 

4 

16 

640 

m 

1840 

Molder's  No Name Date 19 

Pattern  No. 

Molds 
Poured 

Pieces 
in  Mold 

Pieces 

Pounds 
Good 

Hours 
Molding 

Balance 
Due 

Good 

Broken 
or  Core 
Blown 

Bad 

X23 

90 

2 

160 

4 

16 

640 

m 

1840 

If  the  number  of  molders  warrant,  the  clock  system  for 
recording  the  molder's  time  should  be  used.  The  form  of 
record  need  not  differ  from  the  preceding  one.  Under  the 
clock  system  of  recording  the  molder's  time,  the  molder's 
clock  number,  name  and  date  are  filled  in  the  day  previous, 
the  card  being  deposited  at  night  in  the  rack.  The  molder, 
upon  his  arrival  in  the  morning,  removes  the  card  from  the 
rack,  inserts  it  in  the  clock,  or  punches  in,  and  takes  the 
card  with  him  to  the  molding  floor.  The  molder  enters  on 
the  card  the  pattern  number  on  which  he  is  working,  molds 
poured,   pieces   in    the    mold,    and   molding   hours    if    working 


DEPARTMENT  RECORDS  83 

on  more  than  one  pattern  during  the  day.  At  night  the 
molder  takes  the  card  with  him  to  the  clock  and  punches  out 
and  deposits  card  in  rack-  The  cards  are  then  ready  to 
enter  the  pieces  good  and  pieces  bad  which  completes  the 
information. 

The  principal  advantage  of  a  card  over  a  sheet  in 
gathering  information  as  to  molder's  number,  molds  made, 
customer,  pattern  number,  etc.,  is  the  flexibility  of  a  card. 
Cards  can  be  readily  sorted  by  molder's  number  for  pay  roll 
purposes  and  then  by  customers  and  pattern  number  for  cost 
entry  purposes.  It  requires  much  less  time  to  classify  the  cost 
data  before  making  the  entries  than  to  attempt  to  classify  the 
work  after  the  entries  have  been  made. 

The  molder,  generally,  is  relied  upon  to  enter  daily 
the  number  of  molds  poured.  He  is  not  paid  upon  this  count 
alone,  however,  as  the  Trimming  and  Inspecting  Department 
verifies  the  number  through  an  actual  count  of  the  number 
of  pieces  received  by  that  department. 

Without  exception,  every  casting  poured  should  be  ac- 
counted for  either  as  good  or  bad,  the  bad  ones  listed  as  to 
the  nature  of  their  imperfectness,  such  as  miss-run,  core 
blown,  etc.  Molders,  sometimes  try  to  cover  up  poor  or 
careless  work  by  throwing  bad  castings  with  the  sprue  which, 
if  permitted,  is  not  only  bad  plant  practice  but  seriously 
interferes   with   accurate   and   systematic   accounting. 

Molder's    Summary    Production    Card    or    Sheet 

The  data  from  the  molder's  daily  production  card  is  car- 
ried to  either  a  summary  card  or  sheet  and  is  summarized 
for  the  pay  period  which  serves  both  as  a  pay  roll  record 
and  a   cost   record. 

Forms  of  both  a  card  record  and  a  sheet  record  are 
shown . 


84 


FOUNDRY  COST  ACCOUNTING 


MOLDER'S  SUMMARY  PRODUCTION  SHEET 

NAME                                                                                          NO.                                                               : 

Customer 

Pattern  No. 

! 

Pieces  Ordered 

Pieces  in  Mold 

: 

Rate  pc-  Mold 

: 

DATE 

P.  W. 
Hrs. 

D  W. 
Hr.. 

Hrs. 

Molds 
Poured 

Good 
Pieces 

Brok- 

Bid 

C..K.J 

Hrs. 

Molds 
Poured 

Good 
Pieces 

Brok- 

Bad 

Pound* 
Good 

16 

; 

1 

17 

: 

2 

18 

3. 

19 

; 

4 

20 

! 

5 

21 

6 

22 

! 

7 

23 





i 

8 

24 

0 

25 

; 

10 

26 

i 

11 

27 

12 

28 

13 

29 

14 

30 

15 

31 







— 

= 

= 



== 

Total 

Good  and 
Broken 

Molds 

Amount 

1 

.,......: 

Cost  entries  from  either  the  card  record  or  sheet  record 
are  made  directly  to  the  cost  record  of  the  individual  job,  form 
of  which  is  shown  on  page  230. 

Most  of  the  information  at  the  right  hand  side  of  the 
card  shown  on  page  86  is  filled  in  at  the  time  the  order  is 
booked,  the  card  being  held  awaiting  the  time  of  starting  the 
job  and  the  receipt  of  the  daily  production  data  from  the 
trimming  room. 


DEPARTMENT  RECORDS 


85 


MOLDER'S  SUMMARY  PRODUCTION  SHEET— Continued 
|     PAY  ENDING 

Extended 

Checked 

1 

Hrs. 

Molds 
Pour*) 

Cood 
Pieces 

Brok- 

Bad 

( !o  id ~ 

Hr.. 

Molds 
Poured 

Good 
Pieces 

Brok- 

Bad 

Pounds 
Good 

Hrs. 

Molds 
Poured 

Good 
Pieces 

Brok- 
en 

Bad 

Good' 

SUMMARY 

1 

} 





i 

; 

r 

— 





SB**a 

= 

===== 

= 

Shifting 

When  men  from  the  Cleaning,  Trimming,  and  other 
departments,  are  called  upon  at  heat  times  to  assist  in  pour- 
ing and  shifting,  the  time  so  spent  should  be  charged  to  the 
Molding  Department.  This  is  a  fairly  large  and  important 
item  of  cost  in  malleable  and  light  grey  iron  practice.  The 
time  spent  by  departments  can  be  readily  recorded  by  the 
use  of  a  pay  roll   record   similar  to  that  shown  on  page   68. 


86 


FOUNDRY   COST  ACCOUNTING 


c 

o 

3 

r~-  to 

CN 

OS 

Ok 

<r> 

o 
0 

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-£ 

-C 

=    00 

y 

M 

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Molder's  Name 
Molder's  No. 

Bench.  ..\/ .  . 

Floor 

Machine.  .  .  . 
Shop  Order  No 
Customer's  No. 

Pes.  Ordered 
Wt.  per  Piece 
Wt.  per  Mold 
Wt.  per  Mold  wi 
Gate  and  Spru 
Lbs.  Metal  Pour 
Price  per  Mold 
Total  Pieces  Ma 
Total  Pieces  Go 
Total  Lbs.  Goo 

Molding  Direct 
Labor  Cost 
Molding  Hours 

2    M  "i 

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DEPARTMENT  RECORDS 


87 


SUPERINTENDENT'S  DAILY  PRODUCTION  REPORT 

Date 19 

6 

D 

a 

ss^i- 

P.   qK   to 

io 

Pro 

TION 

Moi 

Per 

(Li 

Q   E> 

-J   O 

e^!:     ::::::::: 

Average 
Weight 

per 

Casting 

(Lbs.) 

Total 

Weight 

Good 

(Lbs.) 

o 

CO '.           '. 

Total 
Pieces 
Good 

o 

Per- 
cent 
Bad 

i-H    .              >                 .                 .                 .                 .                 .                 .                 . 

Q 
< 

PQ 
M 

M 

Total 

Pieces 

Bad 

CM  .                   .                    .             ... 

Shipping 
Room  De- 
fectives 

Trimming 
Room  De- 
fectives 

Total 
Pieces 
Poured 

0 ..........      . 

£z 

2  * 

CO 

o ::::::::::      : 

pq  ::::::::::      : 
"■I-:;-:-,::-:-:-?:: 

88 


FOUNDRY  COST  ACCOUNTING 


Superintendent's    Daily    Production    Report 

The  superintendent,  for  his  information  and  guidance, 
should  have  daily  a  summary,  by  pattern  numbers,  of  the  total 
pieces  cast  in  the  foundry,  the  number  of  pieces  good,  number 
of  pieces  bad,  and  percentage  bad,  weight  of  good  production, 
molding  hours  and  production  per  molder  per  hour.  This 
information  can  be  readily  collected  on  the  form  shown 
on  the  preceding  page  and  will  be  found  invaluable  for  com- 
parative and  efficiency  purposes. 


Matches 

It  is  not  ordinarily  necessary  or  usual  to  issue  an  order 
to  the  matchmaker  for  authority  to  make  the  match.     The 


MATCHMAKER'S  DAILY  REPORT 

Date 19.. 

Name  of  Workman 

Name  of  Customer 

Pattern 

No. 

Hard 

Soft 

Time 

This  Report  Must  Show  the  Actual  Time  Con- 
sumed in  Making  Each  Match 

DEPARTMENT  RECORDS  89 

usual  practice  is  to  take  the  pattern,  to  which  is  attached  a 
tag  indicating  the  customer,  pattern  number,  and  number  of 
pieces  ordered,  to  the  matchmaker  to  make  the  match.  Ordi- 
narily it  is  left  to  the  judgment  of  the  matchmaker  whether 
to  make  a  soft  or  hard  match.  A  soft  match  is  usually  made 
for  short  orders.  However,  where  there  is  a  likelihood  of  a 
repeat  order  it  is  usually  advisable  to  make  a  hard  match  for 
the  pattern  even  if  a  soft  match  would  suffice  for  the  imme- 
diate order  at  hand. 

The  matchmaker,  on  his  daily  report,  should  indicate  the 
name  of  the  customer,  and  pattern  number  for  which  the  match 
was  made,  whether  a  soft  or  hard  match,  and  the  time  spent 
in  making  it. 

Pattern  Shop 

In  the  pattern  shop,  an  accurate  record  should  be  kept  of 
the  cost  of  production  of  all  patterns.  Whether  the  expense  is 
borne  by  the  foundry  or  is  a  charge  directly  to  the  customer 
should  have  no  bearing  on  the  manner  of  determining  the  initial 
cost.  The  only  difference  is  in  the  method  of  charging  the 
costs.  If  the  expense  is  borne  by  the  foundry,  it  should  be 
charged  against  the  particular  job,  and  if  the  expense  is  borne 
by  the  customer,  it  should  be  charged  directly  to  the  customer's 
account. 

When  the  pattern  expense  is  borne  by  the  customer,  care 
should  be  taken  to  see  that  the  book  cost  of  the  pattern  pro- 
duction is  really  a  true  cost.  Very  often  either  no  pattern 
overhead  expense  is  charged  or  else  an  insufficient  charge  is 
made.  In  jobbing  foundries  where  patterns  are  made  at  the 
expense  of  the  customer  the  pattern  shop  should  always  be  self 
supporting. 

The  pattern  shop  record  should  show  the  full  history  of 
every  pattern — for  whom  made,  its  number,  kind,  weight  and 
cost  of  material  used,  and  time  spent  in  making  it. 


90 


FOUNDRY  COST  ACCOUNTING 


The    following    form    provides    a    complete    and    practical 
record : 


PATTERN  SHOP 

ShoD  Order  No 

Name  of  Workman 

Date. . . 

1Q 

Nature  of 
Work 

Pat- 
tern 
No. 

No. 
Pes. 

Kind  of 
Matr'l 
Used 

Wt.  of 
Matr'l 
Used 

Hrs. 
Worked 

Labor 
Cost 

Matr'l 
Cost 

Acct. 

to  be 

Charged 

Correct 

FOREMAN 

The  workman  enters,  or  it  is  entered  for  him,  the  nature  of 
the  work,  the  pattern  number,  the  number  of  pieces  in  the  pat- 
tern, the  kind  and  weight  of  material  used  and  the  hours  worked. 
The  labor  and  material  cost  is,  of  course,  computed  in  the  office. 

Customer's   Pattern   Cost   Record 

When  patterns  are  made  for  and  at  the  direct  expense 
of  the  customer,  as  is  often  the  case,  it  is  usual  to  bill  the 
customer  at  a  fixed  labor  rate  per  hour  and  at  a  fixed  material 
rate  per  pound.  In  some  cases  the  labor  and  material  rates 
cover  a  part  of  the  pattern  shop  overhead  expense  while  in 
other  cases  a  straight  overhead  rate  is  charged.  Whichever 
is  the  practice,  the  actual  labor  and  material  cost  and  the  invoice 


DEPARTMENT  RECORDS 


91 


ga 

O   Id 

1 

I 

8 

w 

o  m 

1-3 

E.  ■  o 

a 

«>   U 

*c3 

1 

CO 

pj 

O 
H 

CO 

P 
U 

in 

2>S 
3  h  S 

ft 

■ 
.  u 
o  u 

£ 

s 

i 

g 

< 

U 
& 

Q 

92 


FOUNDRY  COST  ACCOUNTING 


labor  and  material  price  should  be  carefully  recorded  in  order 
to  see  that  the  patterns  have  been  invoiced  at  a  price  sufficiently 
high  to  cover  the  actual  cost  of  labor,  material,  and  pattern 
shop  overhead  expense. 

The  form  on  page  91  can  be  used  to  record  this  informa- 
tion by  customers,  a  separate  sheet  being  used  for  each. 

Pattern  Vault  Card 

In  the  pattern  vault,  needless  to  say,  there  should  be  a 
place  for  every  pattern  and  every  pattern  in  its  place.  As 
fundamental  as  this  seems  to  be,  yet  in  many  foundries  a  great 
deal  of  time  is  wasted  in  locating  patterns  on  hand,  as  well 


PATTERN  VAULT  CARD 

Number 

Customer 

Shelf  Number 

Cores  to  One 

Casting 

Owner 

Bench 

Molderf 
Mark 

Date 

Price 

Pes.  in 

Mold 

Gates 
Plates 

Pes.  per 

Gate  or 

Plate 

Ma- 
terial 

A 

B 

C 

D 

E 

Floor 

Mach. 

F 

G 

H 

I 

J 

Description 

Master 

Rec'd 

Ret'd 

Shelf 

K 

L 

M 

N 

0 

Date  Received 

Date  Returned 

Shipped  to 

Core  Boxes 

Alum. 

Brass 

Iron 

Wood 

DEPARTMENT  RECORDS  93 

as  in  tracing  patterns  returned  to  the  customer  or  shipped 
elsewhere. 

It  is  highly  essential  for  ready  reference  and  for  locating 
that  a  pattern  record  card  be  carried  for  every  pattern  in  the 
vault  as  well  as  for  patterns  withdrawn. 

There  is  only  a  small  percentage  of  foundries  that  have 
an  up-to-date  and  dependable  record  of  their  patterns.  The 
pattern  vault  system  of  most  foundries  is  extremely  poor,  while 
on   the  other  hand  there  are  a   few   with   exceptionally  good 


PATTERN  SHOP  REPAIR  ORDER 

19... 

PATTERN  DEPARTMENT: 

Repair  Pattern  for No 

as  follows: 


Order  issued  by 

Hour Date  and  hour  completed 

All  patterns  that  require  more  than  fifteen  minutes  to  repair  must  pass  thr»  ugh  the  hands 
of  the  pattern  clerk,  coming  and  going,  and  receive  his  signature  after  order  is  first  issued. 

Checked 

Extraordinary  care  must  be  taken  in  regard  to  any  radical  changes,  all  of  which  must  be 
referred  to  the  General  Superintendent. 


94 


FOUNDRY  COST  ACCOUNTING 


records.     The  form  of  pattern  vault  card  shown  on  page  92 
is   a   very   complete   one. 

On  the  back  of  the  card  a  record  of  orders  received  with 
date  and  number  of  pieces  ordered  can  be  shown  to  good 
advantage. 


Pattern  Shop  Repair  Order 

It  is  not  good  practice  to  allow  the  pattern  shop  to  make 
repairs  without  proper  authority,  when  any  considerable  amount 
of  time  is  required  to  make  the  repair.  It  is  the  practice  of  a 
number  of  foundries  to  require  the  authority  of  the  pattern 
clerk  for  the  repair  of  all  patterns  that  require  more  than 
fifteen  minutes  to  make  the  repair.     It  is  usual  also  to  have 


CARPENTER  SHOP 

Shoo  Order  No 

Name  of  Workman Datp 

1Q 

Nature  of  Work 

No. 
Made 

Kind  of 
Matr'l 
Used 

Q'n'ty 

of  M't'l 

Used 

Hours 
Worked 

Labor 
Cost 

Mate- 
rial 
Cost 

Acct. 

to  be 

Charged 

— 

— 

i 

Correct 

FOREMAN 

DEPARTMENT  RECORDS  95 

the  pattern  clerk  report  to  the  superintendent  any  radical 
change  requested  to  be  made  in  the  pattern  before  authority 
is  given  to  make  the  repair. 

Carpenter  Shop 

Ordinarily,  most  of  the  work  in  the  carpenter  shop  is 
for  the  molding  department  and  consists  of  making  and  repair- 
ing flasks,  jackets,  bottom  boards,  match  boxes,  etc. 

The  authority  for  carpenter  shop  production  is  the  shop 
order,  described  below,  which  indicates  the  account  to  which 
the  cost  should  be  charged.  In  all  cases  where  the  equipment  is 
of  a  special  nature  and  for  a  particular  job  the  cost  thereof 
should  invariably  be  charged  to  the  job.  This  is  true  not  only 
of  the  making  of  new  equipment  but  of  the  repairing  and 
renewal  of  old  equipment.  The  cost  of  any  special  equipment 
to  run  a  job  is  just  as  much  a  direct  charge  as  is  the  labor  to 
mold  the  job. 

The  form  of  carpenter  shop  report  shown  on  the  preceding 
page  will  conveniently  serve  as  a  cost  record. 

Shop  Order 

As  authority  for  making  patterns,  flasks,  bottom  boards, 
etc.,  as  well  as  authority  for  making  repairs  to  equipment  and 
buildings,  and  as  a  means  of  charging  the  cost  of  such  parts 
and  repairs  to  the  department  and  to  the  job  where  they 
belong,  the  practice  of  using  a  shop  order  should  be  followed. 
An  order  should  be  issued  for  all  new  parts,  repairs  to  equip- 
ment and  buildings,  etc.,  when  the  time  required  to  make  the 
parts  or  repairs  exceeds  one-half  day's  time. 

The  shop  order  should  give  a  description  of  the  work  to 
be  done  and  provide  for  recording  the  time  spent  and  the 
material  used,  or  any  other  information  needed  in  order 
to  charge  the  cost  of  the  work  to  the  department  or  to  the 
job  getting  the  benefit  thereof. 


96  FOUNDRY   COST  ACCOUNTING 

Coremaking  Department 

The  coremaking  department  is  that  part  of  a  foundry  in 
which  the  cores  are  molded,  baked  and  stored. 

Usually,  the  core  department  is  a  clean  cut  and  well 
denned  department  and  there  are  no  important  auxiliary  shops 
or  parts  of  the  plant  serving  it.  In  addition,  it  is  rare  that 
'help  is  drawn  from  the  core  department  to  temporarily  assist 
in  other  departments,  such  as,  shifting,  pouring,  cleaning,  etc. 
Department  costs,  therefore,  are  easily  and  definitely  deter- 
mined. 

Foundry  practice,  with  respect  to  the  operation  of  the 
Core  Department,  differs  markedly  both  in  operating  practice 
and  in  accounting  procedure. 

In  quite  a  large  proportion  of  foundries  it  is  the  practice 
to  pay  the  coremaker  upon  the  basis  of  the  cores  used  by  the 
molder.  That  is  to  say,  if  a  molder  puts  up  during  a  weekly 
pay  period  500  molds  using  four  cores  per  mold  the  core- 
maker  is  paid  for  producing  2,000  cores  of  that  particular 
pattern.  Under  this  practice  the  coremaker  is  obliged  to  stand 
the  loss  in  baking  and  the  loss  in  handling  and  delivering  to 
the  molder  as  well  as  the  loss  of  those  discarded  by  the  molder 
as  being  slightly  imperfect  though  fit  for  use.  Then,  too, 
there  are  cases  where  the  molder,  knowing  the  coremaker, 
willingly  wastes  cores  knowing  that  the  coremaker's  pay  is 
affected  thereby.  Another  objection  to  this  system  of  payment 
is  that  the  pay  of  the  coremaker  is  often  tied  up  due  to  no 
fault  of  his  through  a  delay  in  the  foundry. 

The  practice  of  other  foundries,  which  seems  to  be  a  much 
fairer  one  to  the  coremaker  and  at  the  same  time  facilitates 
more  accurate  accounting  is  to  count  the  perfect  cores  as  they 
are  molded  and  to  pay  the  coremaker  upon  that  count.  In 
other  words,  the  company  stands  the  loss  of  cores  spoiled  in 
baking  as  well  as  those  broken  in  delivering  them  to  the  molder. 
The  coremaker,  in  justice,  should  be  paid  for  his  good  produc- 
tion and  should  not  be  called  upon  to  stand  the  loss  in  baking 
and  delivering,  operations  over  which  he  has  no  control  what- 


DEPARTMENT  RECORDS  97 

ever.  The  piece  rate  under  this  latter  practice  can  be  less  than 
under  the  former  practice  without  affecting  the  earnings  of  the 
coremaker  and  at  the  same  time  more  nearly  meting  out  justice 
and  avoiding  discontent  and  dissension  with  employes. 

Departmental   Line 

The  departmental  line  for  cost  determining  purposes  is 
when  the  cores  have  been  delivered  to  the  molding  department. 

Production  Order 

The  authority  for  producing  cores  should  originate  from 
the  office  through  a  production  order,  either  a  copy  of  the 
general  production  order  already  referred  to  (page  79),  or  a 
separate  core  production  order.  In  either  case  the  order  should 
give  the  pattern  number,  the  date  to  start  production,  the  total 
number  of  cores  wanted,  the  number  wanted  daily  and  the 
molding  price  per  core  or  per  hundred  cores. 

Core  Production 

The  number  of  cores  ordered  should  be  reasonably  in 
excess  of  the  number  of  castings  to  be  made  to  provide  for 
losses  of  both  cores  and  castings.  The  loss  can  be  predeter- 
mined fairly  closely  upon  past  experience.  On  light  core  work 
there  is  usually  a  loss  of  about  5%  in  baking  and  handling, 
dependent,  of  course,  upon  the  intricacy  of  the  core  and  the 
care  given  it. 

Core  Loss 

The  loss  on  all  kinds  of  core  work  should  be  watched 
closely,  for  in  many  foundries  there  is  a  serious  drain  that 
exists  due  to  the  fact  that  the  magnitude  of  the  loss  is  not 
realized.  The  coreroom  foreman  should  be  held  strictly 
accountable  for  the  loss  that  takes  place  in  his  department, 
while  the   foundry   foreman,  strictly  speaking,   should  be  held 


98  FOUNDRY  COST  ACCOUNTING 

responsible  for  the  loss  of  cores  in  the  foundry  through  bad 
work.  Properly,  the  cost  of  all  cores  spoiled  in  the  foundry 
through  the  production  of  bad  castings  is  a  molding  depart- 
ment expense  but  it  is  rarely  practicable  to  so  consider  it. 
The  loss  accountable  by  the  coreroom  foreman  can  best 
be  shown  by  recording  in  parallel  columns,  by  pattern  num- 
bers, the  number  of  green  cores  made  and  the  number  of 
good  dry  or  baked  cores  delivered  to  the  molders,  the  differ- 
ence representing  the  loss  in  baking  and  in  handling. 

Core  Delay 

When  core  production  is  delayed  for  any  reason,  there 
should  be  a  systematic  manner  of  notifying  the  molding 
department  in  writing  and  not  merely  an  oral  communication 
as  in  this  way  too  many  misunderstandings   result. 


CORE  DELAY  REPORT 

Date 

TO  THE  FOUNDRY  FOREMAN: 
Cores  will  not  be  ready  as  per  schedule  on: 

Pattern  No 

Customer 

Reason 

Signed 


Core  Ticket 

The  coremakers'  time,  or  the  number  of  cores  made, 
for  pay  and  cost  purposes  is  gathered  in  different  ways.  A 
good  method,  in  fairly  general  use  in  the  production  of  light 
cores,  is  for  the  coremaker  to  fill  out  a  core  ticket  which  is 


DEPARTMENT  RECORDS  99 

placed  on  every  plate  of  cores  and  which  shows  the  name 
of  the  customer,  pattern  number,  number  of  cores  made,  and 
the  coremaker's   name  or  number. 


CORE  TICKET 

Order  No. . 

Customer Date 

Pattern  No 

Letter 

No.  Cores  Made 

Coremaker 

Place  one  of  these  Tickets  on  Each  Plate  of  Cores 


The  count  is  checked  by  a  clerk  or  forelady  and  the 
tickets  are  taken  up  by  the  oventender  just  before  placing 
them  in  the  oven-  Postings  are  made  to  a  Coremaker's 
Summary    Production    Card. 

Coremaker's  Summary  Production  Card  or  Sheet 

The  principal  record  of  the  core  department  is  that 
with  labor,  and  it  is  advisable  to  have  but  one  labor  record 
to  serve  for  both  pay  roll  purposes  and  job  cost  purposes, 
whether  a  job  card  record  or  a  pay  sheet  record  is  used. 
The  greater  part  of  the  labor  in  the  core  room  is  direct 
producing  labor  in  molding  cores  and  is  therefore  chargeable 
to    the    job- 

In  recording  the  direct  producing  labor  of  the  core 
department,  the  writer  prefers  a  card  record  with  a  card  for 
each  pattern  number  where  the  patterns  running  are  not  so 
extremely  numerous.  The  advantages  of  a  card  are  its 
flexibility  of  arrangement  whether  by  coremaker,  by  number, 
or  by  customer,  and  ease  and  convenience  in  filing  for  refer- 
ence.    The    disadvantages    of    a    card    in    the    case    of    short 


100 


FOUNDRY  COST  ACCOUNTING 


COREMAKER'S  SUMMARY  PRODUCTION  CARD 

Customer £B.*Cfc 

Pattern  No.  . .  X23 Shop  Order  No 

Coremaker Doe Customer's  Order  No 

Cores  Wanted      2400                                           Pay  Ending 19 .  . 

Rate 

)er  cwt.  ( 7 .  f. 

Pay  Ending 19.  . 

Date 

Hours 

Cores 
Made 

Balance 

Date 

Hours 

Cores 
Made 

Balance 

16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
2S 
29 
30 
31 

1 
2 
3 
4 
5 
G 
7 
8 
9 
10 
11 
12 
13 
14 
15 

420 
440 

410 

1980 
1540 
1130 

460 
470 
200 

670 
200 





Tota 



2400 

Total 

Amount  .    ^18- 00 

Amount  $ 

DEPARTMENT  RECORDS 


101 


2 

AUCTION  SHEET 

NAME                                             AMOUNT  $ 

X 

1 

5 

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co 

8 

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m 

X 

m 

6 

X 

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COR 

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102  FOUNDRY  COST  ACCOUNTING 

running  jobs  are  the  number  of  cards  required  and  the  added 
difficulty  of   arriving  readily  at  the  coremaker's  pay. 

Illustrated  forms  of  both  a  card  record  and  of  a 
sheet  record  are  shown.,   which  are  self   explanatory. 

In  connection  with  the  use  of  the  latter  form,  the  core- 
maker  is  given  a  card  at  the  time  the  job  is  started,  on 
which  he  enters  the  date,  and  the  number  of  cores  made  daily. 
From  that  record  postings  are  made  to  the  above  summary 
pay  sheet  record. 

The  column  "hours"  on  both  the  Coremaker's  Sum- 
mary Production  Card  and  the  Coremaker's  Pay  Sheet 
Record  is  to  enter  the  time  of  day  workers. 

Core  Stock  Record 

It  is  not  usual  for  jobbing  foundries  to  produce  cores 
for  stock,  although  a  few  foundries  on  long  running  jobs, 
make  the  cores  far  in  advance  of  the  time  they  will  be 
needed.  On  all  jobs  a  stock  of  cores  for  at  least  one  day's 
production  should  always  be  available  in  order  that  the  tem- 
porary absence  of  the  coremaker  may  not  tie  up  the  foundry 
production. 

A  daily  core  production  should  be  scheduled  for  long 
running  jobs  so  as  not  to  accumulate  an  unduly  large  stock 
and  at  the  same  time  provide  an  ample  working  margin  for 
safety. 

It  is  usual  to  produce  about  10%  more  cores  than  are 
called  for  by  the  number  of  good  castings  wanted  to  provide 
for  losses  through  breakage,   blows,  bad  and  broken  castings. 

All  unused  cores,  or  imperfect  ones,  if  delivered  to  the 
molding  department  should  be  returned  at  once  to  the  core 
department,  preserving  the  good  ones  for  future  orders. 
For  this  purpose  an  accurate  record  should  be  kept  of  sur- 
plus stock.  Any  reasonable  surplus,  however,  should  be 
charged  to  the  job  even  though  it  is  placed  in  stock  with  a 
possibility  of  applying  on  a  repeat  order. 


DEPARTMENT  RECORDS 


103 


Foundries  that  produce  specialties,  or  work  that  is  made 
for  stock  in  advance  of  orders,  usually  produce  cores,  more 
or  less  intermittedly  and  often  considerably  in  advance  of 
the  time  they  are  used.  In  such  cases  an  accurate  stock 
record  should  be  kept  showing  the  date  and  number  of  cores 
put  in  stock  and  the  date  and  number  taken  out  of  stock  for 
consumption.  The  cost  of  the  cores  taken  out  of  stock 
for  use  should  enter  into  the  month's  cost  of  castings  pro- 
duced and  not  the  cost  of  the  cores  produced  and  put  in 
stock. 


CORE  STOCK  RECORD 

PATTERN  No CI  TSTOMF.R 

RACK 

SHELF 

Order 
Date 

Pes. 
Ord'd 

Core- 
maker 

Date 

Cores 
In 

Cores 
Out 

Date 

Cores 
In 

Cores 
Out 

Date 

Cores 
In 

Cores 
Out 

Date 

Cores 
In 

Cores 
Out 



104  FOUNDRY  COST  ACCOUNTING 

Cleaning  Department 

The  Cleaning  Department  is  that  part  of  the  foundry  in 
which  the  castings  are  tumbled  or  sand-blasted  to  remove  the 
molding  sand  adhering  to  them. 

In  the  manufacture  of  grey  iron  and  steel  castings  there 
is  but  one  cleaning  operation  while  in  the  manufacture  of 
malleable  iron  castings  two  cleaning  operations  are  required — 
the  first,  to  remove  the  molding  sand  adhering  to  the  casting, 
and  the  second,  after  the  annealing  process,  to  remove  the 
scale  and  adhering  packing  material.  Accordingly,  in  the 
manufacture  of  malleable  iron  castings,  there  are  two  separate 
and  well  denned  cleaning  departments  and  the  operating  costs 
of  each  should  be  separately  and  accurately  kept.  These  two 
operations  are  known  as  Hard  Iron  Cleaning  and  Soft  Iron 
Cleaning. 

A  great  many  foundries,  particularly  the  smaller  ones,  do 
not  separate  departmentally  their  costs  of  cleaning  and  of 
trimming  and  inspecting.  The  practice  is  a  bad  one  for  the 
reason  that  the  costs  are  of  a  very  different  nature  and  cannot 
be  equitably  distributed  to  the  job  upon  the  same  basis.  (See 
pages  220  and  221.  Apart  from  this,  all  advantages  of  depart- 
mental costs,  for  comparative  purposes  to  determine  plant 
efficiency,  are  lost. 

Usually  there  are  no  shops  or  auxiliary  parts  of  the 
plant,  other  than  the  power  plant,  serving  the  cleaning  depart- 
ment and  the  accounting  is  not  complicated. 

There  are  no  special  records  needed  by  the  cleaning  de- 
partment. The  operating  costs  of  the  department  are  princi- 
pally labor  and  burden  consisting  of  repairs,  depreciation, 
power,  etc. 

Tumbling 

As  stated  above,  castings  are  cleaned  either  by  tumbling 
or  sand-blasting.  Hand  cleaning  and  pickling  have  become 
almost  obsolete.  "Tumbling"  is  simply  placing  the  castings  in  a 
revolving  steel  barrel  in   which  is  also  placed   stars   or   other 


DEPARTMENT  RECORDS  105 

small  pieces  of  hard  metal  to  assist  in  wearing  off  the  sand 
and  scale  through  surface  contact.  There  are  a  number  of 
different  types  of  tumbling  barrels  or  mills,  some  of  which  are 
of  large  size  and  in  which  very  heavy  castings  can  be  cleaned. 
It  is  the  most  common  and  cheapest  method  of  cleaning, 
although  not  the  most  efficient. 

Sand-Blasting 

Sand-blasting  is  the  most  efficient  method  of  cleaning  cast- 
ings, especially  where  intricate  core  work  is  to  be  cleaned  or  a 
surface  absolutely  free  from  scale  and  sand  is  desired.  While 
the  ordinary  method  of  tumbling  is  cheaper,  the  finish  imparted 
by  the  sand-blast  process  is  so  much  superior,  it  is  often  con- 
sidered worth  the  additional  cost. 

Sand-blasting  can  be  divided  into  two  general  classes, 
hand  blasting  and  automatic  blasting. 

Hand  blasting  is  the  most  efficient.  This  is  due  to  the  fact 
that  the  sand  and  scale  on  a  casting  is  harder  in  some  spots 
than  in  others,  and  a  more  intensive  application  of  the  blast 
can  be  applied  on  the   harder  parts. 

For  light  work,  there  are  several  types  of  automatic  ma- 
chines, the  most  common  and  efficient  is  the  sand-blast  tumbling 
barrel  of  which  there  are  several  types.  For  simple  flat  work, 
such  as  stove  plate,  the  automatic  rotary  table  is  frequently 
used.  For  special  work,  such  as  radiators,  special  machines 
are  designed. 

For  medium-size  castings,  weighing  from  50  to  say  500 
pounds,  which  are  too  large  to  be  handled  in  tumblers  or  auto- 
matic machines,  the  rotary-table  type  of  sand-blast  room  has 
recently  become  very  popular. 

For  the  general  run  of  large  work  which  cannot  be 
handled  on  the  so-called  automatic  machines,  various  special 
sizes  and  types  of  sand-blast  rooms  are  designed.  The  most 
common  is  one  constructed  of  heavy  steel  into  which  the  work 
is  conveyed  on  cars  or  trucks  operating  on  industrial  tracks  or 
by  an  overhead  monorail  or  crane. 


106  FOUNDRY   COST   ACCOUNTING 

Under  present  conditions,  and  with  modern  equipment, 
the  cost  of  sand-blasting  is  about  %c  per  pound  or  $5.00  per 
ton   in  excess  of   the  cost  of   tumbling. 

While  this  is  probably  a  fair  average  of  the  apparent  total 
additiona  cost  of  sand-blasting,  yet  in  sand-blasting  there  is 
another  important  cost  factor  that  should  not  be  overlooked. 
A  casting  that  is  sand-blasted  will  show  a  far  greater  number 
of  minor  defects  than  one  that  is  tumbled,  and  as  the  defects 
are  more  apparent,  rejections  are  heavier,  thereby  increasing 
considerably  the  cost  of  the  castings  retained  by  the  customer. 
In  some  cases  the  loss  resulting  from  a  larger  rejection  is 
nearly  as  great  per  ton  as  the  actual  cost  of  sand-blasting. 

Due  to  the  weight  and  intricacy  of  most  steel  castings  it 
is  necessary  to  sand-blast  them.  However,  in  the  case  of  small 
plain  steel  castings  they  are  tumbled  the  same  as  light  grey 
iron  and  malleable  iron  castings. 

Separate  Costs  of  Tumbling  and  Sand  Blasting 

When  both  tumbling  and  sand-blasting  are  used  as  a 
cleaning  process,  as  is  usually  the  case,  the  accounts  of  the  de- 
partment, if  practicable,  should  be  so  divided  as  to  show  separately 
•the  costs  per  ton  of  tumbling  and  of  sand-blasting,  subdividing  the 
latter  where  possible  into  hand  blasting  and  automatic  blasting. 
There  is  a  marked  difference  between  the  costs  of  the  two  cleaning 
processes  and  castings  that  are  required  to  be  sand-blasted 
should  bear  the  added  cost.  Power  is  the  big  item  of  cost 
in  sand-blasting  and  it  is  the  one  most  difficult  to  determine 
accurately  as  usually  the  air  is  drawn  from  a  compressor  serv- 
ing other  departments  of  the  foundry  as  well.  The  cost  of  the 
power  consumption,  however,  can  always  be  readily  deter- 
mined fairly  accurately.  Depreciation  is  another  important 
item  of  cost  in  sand-blasting,  and,  ordinarily,  it  is  heavier  than 
in  tumbling. 


DEPARTMENT  RECORDS  107 

Departmental  Line 

The  departmental  line  is  when  the  castings  have  been 
delivered  to  the  Trimming  and  Inspecting  Department  or  to 
the  Finishing  and  Shipping  Department,  as  the  case  may  be. 

Trimming   and   Inspecting    Department 

The  Trimming  and  Inspecting  Department  is  the  part  of 
the  foundry  in  which  the  castings,  after  they  are  cleaned, 
are  trimmed  and  inspected.  The  trimming  operation  consists 
of  knocking  off  the  lugs,  fins,  gates  and  rough  parts  of  the 
casting  so  that  it  will  conform  in  outline  strictly  to  the  pattern. 
On  most  castings  the  greater  part  of  the  trimming  work  is 
that  of  knocking  off  the  gate  close  up  to  the  casting.  When 
two  or  more  castings  are  molded  together  the  gate  through 
which  the  metal  runs  from  one  casting  to  the  other  does  not 
always  break  off  close  up  to  the  casting,  which  makes  a  trim- 
ming operation  necessary. 

Rigid   Inspection,    an    Important    Cost    Factor 

In  malleable  iron  practice  a  very  careful  and  rigid  inspec- 
tion should  be  made  at  the  time  the  casting  is  trimmed,  as  bad 
and  defective  work  can  be  thrown  out  at  that  stage  of  produc- 
tion and  save  the  added  expenses  of  annealing  and  recleaning 
a  casting  that  would  ultimately  have  to  be  treated  as  defective 
and  remelted. 

Inspection  Report 

After  the  castings  have  been  trimmed  and  inspected  they 
are  counted  and  notations  made  of  the  number  and  weight  of 
both  the  good  and  bad  pieces. 

The  first  form  shown  below  is  more  suitable  to  grey  iron 
and  steel  practice,  while  the  second  form  is  more  particularly 
applicable  to  malleable  iron  practice. 


108 


FOUNDRY  COST  ACCOUNTING 


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DEPARTMENT  RECORDS  109 


TRIMMING  DEPARTMENT  COUNT 

Date 

Customer 

Pattern  No 

Weight 

Pieces  Good 

Pieces  Bad 

No. 

In  explanation  of  the  second  form,  the  inspector  enters 
the  pattern  number  and  the  number  of  pieces,  both  good  and 
bad.  Then,  when  the  castings  are  ready  to  be  weighed,  the 
ticket  is  turned  in  to  the  Trimming  Room  office  where  the 
weight  is  entered.  One  copy  of  the  ticket  serves  as  a  posting 
medium  to  the  molder's  daily  production  card  and  another 
copy  is  placed  on  and  remains  with  the  castings  until  they  are 
packed  in  the  annealing  oven. 

Oven  Record 

As  the  castings  are  packed  a  notation  is  made  on  the  card 
of  the  oven  in  which  they  were  packed  and  of  the  set 
number,  i.  e.,  the  position  of  the  oven  in  which  they  were 
placed. 

The  first  four  items  of  information  on  the  trimming  room 
ticket  and  on  the  annealing  room  ticket  are  filled  in  at  the 
same  writing. 


110 


FOUNDRY  COST  ACCOUNTING 


OVEN  RECORD 

Date 

Customer 

Pattern  No 

Weight 

Pieces Packed 

Set  No. 

Oven  No 

Oven  No 

No. 

Trimming   Department    Report 

The  inspector  should  also  make  a  report  to  the  trimming 
room  clerk  of  the  number  of  pieces  bad,  core  blown,  broken, 
etc.,  by  pattern  numbers.  This  data  should  be  tabulated  for  the 
information  of  the  foundry  foreman  as  it  is  most  essential  to 
the  successful  operation  of  the  molding  department. 


Elimination   of  the   Hard   Iron   Weight 

Practically  every  malleable  iron  foundry  of  the  country 
makes  a  careful  weight  of  the  good  hard  iron  castings  in  the 
trimming  room  after  they  are  inspected  and  just  before  deliv- 
ering to  the  annealing  department.  Then,  in  order  to  arrive 
at  the  weight  of  good  finished  castings,  the  shipping  room 
defective  castings,  or  those  castings  found  to  be  bad  after 
the  annealing  process,  are  deducted,  as  well  as  a  further  deduc- 
tion in  weight  to  represent  the  loss  through  oxidation  that  has 
taken   place  during  annealing,   usually   running  around    1%. 

A  few  companies  have  eliminated,  with  a  considerable 
saving  in  labor,  the  hard  iron  weight  for  production  and 
cost  purposes  and  use  in  its  stead  the  weight  of  finished  cast- 


DEPARTMENT  RECORDS 


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112  FOUNDRY  COST  ACCOUNTING 

ings  found  by  multiplying  the  number  of  good  pieces  produced 
by  the  finished  weight  of  the  casting,  the  shipping  room  fore- 
man reporting  from  time  to  time  the  finished  weight  of  each 
pattern  of  casting  produced. 

The  practice  not  alone  saves  the  time  of  the  weigher 
at  the  hard  iron  scales  but  saves  a  considerable  amount  of 
time  in  the  handling  of  the  castings  in  the  trimming  and  in- 
specting room,  as  the  castings  do  not  have  to  be  kept  separately 
by  pattern  numbers  as  it  is  necessary  to  do  when  the  hard 
iron  weight  is  obtained. 

From  the  standpoint  of  obtaining  accurate  costs,  the  plan 
has  a  great  deal  in  its  favor  for  the  shipping  weight  is  the 
actual  weight  and  the  weight  upon  which  the  castings  are  sold. 
The  hard  iron  weight  is  from  1%  to  2%  greater  and  when 
used  as  a  divisor  gives  a  cost  of  from  1%  to  2%  under  the 
true  cost  of  production. 

In  the  case  of  new  work,  costs  per  unit  cannot  be  com- 
puted as  promptly  as  when  the  hard  iron  weight  is  used 
as  a  divisor,  but  the  added  accuracy  of  the  costs  based  upon 
the  weight  of  the  finished  castings  more  than  justifies  a  delay 
of  the  time  required  to  anneal  and  reclean. 

Departmental  Line 

The  departmental  line  for  cost  determining  purposes  is 
the  point  of  delivering  the  castings  to  the  Annealing  Depart- 
ment. 

Annealing  Department 

The  Annealing  Department  is  that  part  of  a  malleable 
iron  foundry  and  of  a  steel  foundry  in  which  the  castings 
are  prepared  and  packed  for  annealing,  annealed,  dumped  and 
stored  awaiting  delivery  to  the  Soft  Iron  Cleaning  Depart- 
ment, if  malleable  iron  castings,  or  to  the  Finishing  and 
Shipping  Department,   if   steel  castings. 

Steel  castings  are  both  annealed  and  unannealed.  In  cases 
where    they    are    annealed    the    process    is    very    dissimilar    to 


DEPARTMENT  RECORDS  113 

the  process  of  annealing  malleable  iron  castings.  Steel  cast- 
ings are  usually  placed  in  the  oven  loose  and  not  packed  in 
pots  as  are  malleable  iron  castings  and  the  time  to  anneal 
steel  castings  is  only  a  fraction  of  the  time  that  is  required 
to    anneal    malleable    iron    castings. 

While  the  cost  to  anneal  steel  castings  is  materially  less 
than  the  cost  to  anneal  malleable  iron  castings,  yet  the 
exact  cost  in  steel  practice  should  not  be  lost  sight  of  and 
all  expenses  pertaining  thereto  should  be  separately  classified 
and  not  thrown  with  the  operating  costs  of  other  departments. 

It  is  always  best  in  malleable  iron  practice,  for  com- 
parative purposes,  not  to  confuse  annealing  costs  and  soft 
iron  cleaning  costs,  although  there  is  a  tendency  to  do  so. 
There  is  no  advantage  to  be  gained  in  combining  the  costs 
of  the  two  operations.  It  is  not  as  serious,  however,  to 
throw  together  costs  of  annealing  and  soft  iron  cleaning 
as  it  is  to  combine  costs  of  hard  iron  cleaning  and  trimming 
and  inspecting  for  the  former  can  be  properly  distributed 
over  the  work  going  through  the  plant  on  the  same  basis 
while   the   latter   cannot. 

Pots  and  Bottoms 

In  the  manufacture  of  malleable  iron  castings,  it  is 
usual  to  pack  the  castings  in  cast  iron  pots  about  two  feet 
square  before  they  are  placed  in  the  annealing  ovens  to  pro- 
tect them  from  the  gases  of  the  oven.  "Bottoms"  are  low 
stools  on  which  the  pots,  which  are  without  tops  or  bottoms 
rest. 

Most  malleable  iron  foundries  make  their  pots  and 
bottoms  from  surplus  molten  metal,  i.  e.,  metal  in  excess 
of  the  quantity  required  to  fill  the  molds  on  the  floor.  Some 
foundries  have  provided  cupolas  in  which  to  melt  iron  of  a 
cheaper  character  for  making  pots  and  bottoms  while  still 
other  malleable  iron  manufacturers  buy  their  pots  and 
bottoms. 


114  FOUNDRY  COST  ACCOUNTING 

In  the  event  that  pots  and  bottoms  are  purchased,  they 
are  handled  exactly  the  same  as  other  material,  the  cost 
thereof   being  charged  to  the   Pots   and   Bottoms   Account. 

When  the  iron  for  making  pots  and  bottoms  is  melted  in 
a  cupola  and  molded  on  a  floor  separate  from  the  foundry 
proper  there  is  usually  no  difficulty  in  recording  accurately  the 
production  costs  of  the  pots  and  bottoms  as  all  the  costs 
of  the  cupola  and  of  molding  are  separate  and  distinct  from 
the  operating  costs  of  the  main  foundry.  Even  the  pig  iron 
used  is  ordinarily  bought  for  that  purpose,  consequently,  there 
is   no   confusing   of    pig   iron   costs. 

Where  the  pots  and  bottoms  are  made  from  surplus 
molten  metal,  however,  the  treatment  of  the  account  is  one 
of  the  most  troublesome  in  malleable  iron  practice.  The 
difficulty  is  that  it  is  not  always  practicable  to  handle  alt  the 
costs  as  they  should  be  handled.  This  is  particularly  true  of 
the  melting  costs  and  of  the  overhead  molding  costs.  The 
costs  of  the  metal  used  in  making  pots  and  bottoms  and  the 
direct  labor  cost  of  molding  can  be  charged  to  the  pots  and 
bottoms  accounts  with  no  particular  difficulty  and  all  malleable 
iron  foundries  should  at  least  ascertain  the  direct  costs  of 
producing  their  pots  and  bottoms  which  becomes  an  operat- 
ing   expense    of    the    Annealing    Department. 

The  following  treatment  of  the  accounts  will  give  effect 
to  this  with  only  a  few  minutes  time  at  the  end  of  the  month. 
Credit  the  Pig  Iron  account  at  the  end  of  the  month  with  the 
cost  of  the  iron  used  in  making  Pots  and  Bottoms,  the  weight 
of  the  pots  and  bottoms  produced  being  assumed  to  be  90% 
of  the  weight  of  the  iron  used,  and  charge  the  Pots  and  Bot- 
toms account.  The  direct  labor  cost  of  molding  can  be 
charged  to  the  Pots  and  Bottoms  account  directly  whether  it 
is  piece  work  or  day  work. 

Strictly,  the  cost  of  producing  pots  and  bottoms  should 
bear  their  share  of  the  melting  cost  and  carry  a  part  of  the 
molding  overhead  expense,  but  this  is  a  refinement  that  savors 
of    some   unnecessary    detail.     There   is,    of    course,    no    objec- 


DEPARTMENT  RECORDS  115 

tion,  other  than  the  additional  clerical  labor,  to  getting  a 
more  accurate  cost  of  pots  and  bottoms  than  that  represented 
by  the  items  of  metal  and  molding. 

Regardless  of  whether  pots  and  bottoms  are  manufac- 
tured or  purchased,  the  costs  thereof  should  be  charged  to  a 
Pots  and  Bottoms  account  and  handled  the  same  as  all  other 
material  accounts.  It  is  wrong  to  have  the  metal  account 
represent  both  the  metal  used  in  the  manufacture  of  salable 
castings  and  in  the  manufacture  of  pots  and  bottoms  which 
are  necessary  for  use  in  the  manufacture  of  salable  castings. 
Likewise,  it  is  wrong  to  have  the  molding  direct  labor  account 
represent  both  the  direct  labor  of  molding  salable  castings 
and  the  labor  of  molding  pots  and  bottoms.  The  mixing  of 
costs  in  this  way  seriously  distorts  the  costs  not  only  of  the 
annealing  department  but   of   other   departments   as   well. 

Annealing  Oven  Report 

An  accurate  report  of  castings  packed  in  the  anneal 
should  always  be  available  for  purposes  of  plant  manage- 
ment, the  reports  showing  the  name  of  the  customer  for 
whom  the  work  is  made,  the  pattern  number,  the  quantity 
and  the  weight. 

It  is  a  good  practice  to  furnish  the  customer  with  a 
copy  of  such  a  report  for  his  information  as  when  to  expect 
shipment.  About  three  carbon  copies  should  be  made,  one  for 
the  annealing  department,  one  for  the  shipping  department,  and 
one  for  the  general  office.  The  form  shown  on  the  following 
page  will  be  found  to  be  very  suitable  for  this  purpose. 

Departmental  Line 

The  departmental  line  for  cost  determining  purposes 
is  when  the  castings  have  been  delivered  to  the  succeeding 
department. 


116 


FOUNDRY  COST  ACCOUNTING 


ANNEALING  OVEN  REPORT 

THE  JOHN  DOE  FOUNDRY  COMPANY 

Cleveland,  0 19.. 

To 

We  beg  to  advise  that  the  following  castings,  applying  on  your  orders  as 
listed  below,  were  today  packed  in  Annealing  Oven  number 

Barring  accidents,  or  causes  beyond  our  control,  shipment  will  be  made  about 
19.. 

Pattern  No. 

Pieces 

Weight 

Will  Be  Applied 
On  Order  No. 

The  John  Doe  Foundry  Company 

Per 

DEPARTMENT  RECORDS  117 

Finishing  and   Shipping   Department 

In  all  cases  where  finishing  and  shipping  operations  are 
handled  in  separate  departments,  the  costs  should  be  sep- 
arately recorded.  In  the  case  of  many  foundries,  however, 
it  is  not  practicable  to  draw  a  line  between  the  two  operations 
and  for  this  reason  the  costs  have  to  be  treated  as  falling 
within   a   given    department. 

Finishing   Room 

The  finishing  room  is  that  part  of  the  foundry  in  which 
the  castings  receive  such  finishing  operations  as  chipping, 
grinding,  straightening,  drifting,  painting,  galvanizing,  etc. 
Usually  it  is  necessary  to  do  a  considerable  amount  of  sort- 
ing in  the  finishing  room. 

Air  Chipping 

Chipping  is  done  both  by  hand  and  by  air.  Where  air 
chippers  are  used  the  cost  of  producing  the  air  consumed 
as  well  as  the  up-keep  of  the  air  apparatus  should  be  charged 
to  the  finishing  department.  The  distribution  usually  cannot 
be  made  accurately  but  sufficiently  accurately  for  all  practical 
purposes.  While  air  chipping  is  not  used  very  extensively 
in  the  production  of  malleable  iron  castings,  it  is  employed 
more  generally  in  the  production  of  grey  iron  and  steel 
castings. 

Time  Record 

Time  slips  should  be  made  out  for  all  finishing  opera- 
tions showing  the  nature  of  the  operation,  customer's  name, 
pattern  number,  and  time  spent  on  the  work,  if  day  work, 
or  pieces  finished,  if  piece  work,  so  that  the  cost  of  the 
operation  can  be  treated  as  a  direct  charge  and  not  as  a 
general  overhead  expense.  It  is  manifestly  wrong  to  burden 
castings  not  requiring  any  finishing  with  a  part  of  such  costs. 


118 


FOUNDRY   COST  ACCOUNTING 


If  a  workman  is  engaged  during  the  day  on  the  work 
of  different  customers,  it  is  best  generally  to  make  out  but 
one  card  as  in  this  way  his  entire  time  is  on  a  single  card 
and  from  which  he  can  be  paid.  While  this  necessitates  a 
recapitulation  being  made  for  cost  posting  purposes,  it  never- 
theless, generally  proves  more  satisfactory  than  making 
out  a  card  for  each  job  on  which  the  workman  was  engaged- 
Two  forms  of  time  records  are  shown  below.  The 
first  one  is  more  applicable  to  steel  and  malleable  practice 
and  the  latter  one  to  grey  iron  practice  where  more  extensive 
finishing  operations   are  performed  in  the   way   of   machining. 


FINISHING  DEPARTMENT  TIME  RECORD 

Clock 

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Shipping  Room 

The  Shipping  Room  is  that  part  of  a  foundry  in  which 
the  castings  are  sorted  by  pattern  numbers,  finally  inspected, 
weighed,  packed  or  bagged  and  placed  in  the  cars  for  ship- 
ment- 

Shipping   Record 

The  principal  records  of  the  shipping  room  are  the  daily 
record  of   shipments   and   the   summary   record   of    shipments. 


Customer. . . 
Address 

SHIPPING  RECORD 

Date  Shipped 

Via 

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No. 
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Pattern 
No. 

Shop 

Order 

Number 

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Net 
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Total 
Wt. 

Price 

Amount 

Checked Shipped 

Invoiced Number  ( 

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DEPARTMENT  RECORDS 


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FOUNDRY   COST   ACCOUNTING 


The  daily  record  of  shipments  from  which  the  billing  is 
made  should  give  full  information  as  to  the  castings  shipped, 
name  of  customer,  date,  number  of  pieces,  pattern  number, 
shop  order  number,  customer's  order  number,  gross  weight 
and  net  weight.  The  shipping  clerk  enters  all  of  the  infor- 
mation at  time  of  shipment  except  the  price  and  amount 
which  the  general  office  enters. 

For  long  running  jobs,  and  where  shipments  are  fre- 
quent and  only  partially  cover  the  quantity  ordered,  it  is 
necessary  to  summarize  the  individual  shipments  in  order  that 
the  total  may  not  exceed  the  quantity  ordered.  At  the  same 
time  a  record  of  this  nature  affords  information  both  for 
the  general  office  and  the  superintendent  as  to  when  the 
order  has  been  entirely  filled. 


INVOICE 

The  A.  B.  Foundry  Company- 
Cleveland,  Ohio 

19 

Sold  to 

Shipped  to 

By 

Terms — Net  cash  tenth  of  month  after  date  of  invoice. 

All  claims  for  allowances  must  be  made  promptly  upon  receipt  of  goods. 

Order  No. 

No.  OF 
Pieces 

Description 

Weight 

Price 

Amount 

DEPARTMENT  RECORDS  123 

The  name  of  the  customer,  his  order  number,  date  of 
order,  pattern  number,  pieces  ordered,  and  shipping  instruc- 
tions are  filled  in  at  the  time  the  order  is  made  out  and 
entered  on  the  books.  The  form  then  goes  to  the  shipping 
room,  and  as  the  shipments  are  made  they  are  summarized 
from  day  to  day. 

It  is  best  to  make  the  order  in  triplicate,  and  when  the 
order  has  been  filled  to  send  one  copy  to  the  office,  one  to 
the   superintendent,   and  to   retain  one   in   the   shipping   room. 

Needless  to  say  there  should  be  an  exact  and  strictly 
accurate  record  of  everything  going  out  of  the  shipping 
room.  Inaccuracy  and  carelessness  in  the  shipping  department 
and  in  billing,  are  most  likely  to  be  sources  of  large  losses 
and  extreme  care  should  for  this  reason  be  taken  in  the 
selection  of  shipping  room  employees  and  billing  clerks. 

Returned  Castings 

Foundries,  as  a  rule,  are  extremely  careless  about  record- 
ing and  checking  up  castings  returned  by  their  customers  as 
defective.  Immediately  upon  receipt  of  returned  castings,  they 
should  be  classified  by  pattern  number,  recording  the  number 
of  the  pieces  of  each  pattern  and  the  weight.  Should  any  of 
the  castings  be  found  to  be  of  another's  make,  as  is  sometimes 
the  case,  an  entry  to  this  effect  should  be  made  as  few  care  to 
allow  credit  for  the  bad  work  of  other  foundries.  Unless  the 
returns  are  carefully  examined  this  can  very  easily  be  the  case. 

The  recording  of  castings  returned  by  customers  is  seldom 
such  as  to  give  accurate  cost  results,  particularly  for  monthly 
periods.  It  is  the  practice  of  many  companies,  upon  the  return 
of  castings  to  simply  charge  Sales  Account  and  credit  the  cus- 
tomer, thus  losing  sight  of  the  cost  to  produce  the  defectives, 
as  well  as  their  value  as  scrap.  Furthermore,  exceptionally 
heavy  or  exceptionally  light  returns  will  seriously  distort 
monthly  profit  and  loss  statements. 

Where  returns  are  at  all  heavy  the  best  practice  is  to 
provide  therefor  by  setting  up  at  the  end  of  each  month  a 


124 


FOUNDRY  COST  ACCOUNTING 


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reserve  sufficient,  based  upon  past  experience,  to  fully  take 
care  of  the  invoice  price,  less  scrap  value,  of  the  castings 
returned.     The  entries  required  would  be  the  following: 

Defective   Returns    $1,000 

To  Reserve  for  Defectives  $1,000 

$2.00  per  ton  on  January  production 

Purchased  Scrap    $100 

Reserve  for  Defectives   900 

To   Customer    $1,000 

Return  of  5  tons  defectives  at  $200.00  per  ton. 


The  above  treatment  distributes  equally  month  by  month 
the  defective  returns,  records  the  scrap  value  of  the  castings 
and  provides  the  credit  to  the  customer. 

Properly,  the  account  "Defective  Returns"  should  be 
treated  as  a  sales  deduction  in  accordance  with  accepted  ac- 
counting practice,  but  in  the  foundry  industry  where  returns 
are  exceptionally  heavy,  particularly  in  certain  branches,  the 
better  practice  seems  to  be  to  charge  the  amount  set  up  monthly 
to  represent  defective  returns  to  cost  of  production.  In  this 
way  it  gets  in  the  general  overhead  expense  and  therefore  is  not 
overlooked  in  estimating.  In  a  sense,  castings  found  defective 
by  the  customer  do  not  differ  from  those  found  defective 
before  shipment,  and  both  should  be  treated  similarly,  namely, 
as  a  cost  item. 


CHAPTER  VII 
CLASSIFICATION  AND   DEFINITION  OF  ACCOUNTS 

Introductory 

While  it  is  highly  desirable  commercially,  that  the  mem- 
bers of  an  industry  adopt  substantially  the  same  basic  princi- 
ples of  cost  accounting,  it  is  not  necessary  that  they  adopt 
and  follow  identical  cost  accounts  as  long  as  they  observe  the 
general  cost  principles  and  divisions. 

Companies  that  care  for  but  little  detailed  information  can 
follow  the  scheme  of  a  classification  of  accounts  by  consoli- 
dating the  accounts  under  a  given  head  while  companies  that 
want  and  make  use  of  a  greater  amount  of  detailed  informa- 
tion than  that  shown  by  a  given  classification  of  accounts  can 
further  divide  them.  When  general  heads,  or  cost  divisions, 
are  oLserved  by  different  companies,  even  though  the  accounts 
thereunder  in  number  and  in  name  differ,  the  results  for  group 
total  still  afford  a  true  comparison.  Standard  classifications 
should  be  observed  at  least  as  far  as  the  cost  divisions  or 
general  heads  go. 

Three  separate  classifications  of  accounts  are  shown,  one 
for  grey  iron  foundries,  one  for  malleable  iron  foundries  and 
one  for  steel  foundries.  The  only  difference  in  the  classifica- 
tions is  in  the  departmental  arrangement,  which  result  from 
differences  in  the  processes. 

Both  account  numbers  and  account  names  are  shown.  The 
system  of  numbering  the  accounts  is  such  that  the  number 
identifies  both  the  department  and  the  nature  of  the  expense. 
For   instance,    account 

Number  31  is  direct  labor,  molding  department. 
Number  41  is  direct  labor,  coremaking  department. 
Number  61  is  direct  labor,  finishing  department. 

In  every  instance  the  first  number  indicates  the  depart- 
ment and  the  second  number  the  nature  of  the  expense. 

127 


128  FOUNDRY  COST  ACCOUNTING 

Classification  of  Accounts  for  Grey  Iron  Foundries 
Metal  : 


10-] 

[     Pig  Iron, 

10-2     Scrap. 

ELTING 

Department  : 

22 

Indirect  Labor, 

23 

Fuel, 

24 

Flux, 

25 

Supplies  and  Tools, 

26 

Repair  Labor, 

27 

Repair  Materials, 

28 

Fixed  Plant  Charges, 

29     Laboratory   Expense. 

Molding   Department: 

31  Direct  Labor — 

31-1     Direct  Labor — Bench  Molding, 
31-2     Direct  Labor — Floor  Molding, 
31-3     Direct  Labor — Machine  Molding, 

32  Indirect  Labor. 

35  Supplies  and  Tools, 

36  Repair  Labor, 

37  Repair  Materials, 

38  Fixed  Plant  Charges, 

39  Special  Pattern  and   Flask  Expense. 

COREMAKING    DEPARTMENT: 

41  Direct  Labor, 

42  Indirect  Labor, 

43  Fuel, 

45  Supplies  and  Tools, 

46  Repair  Labor, 

47  Repair  Materials, 

48  Fixed  Plant  Charges. 


CLASSIFICATION   OF  ACCOUNTS  129 

Cleaning  and  Chipping  Department: 

52  Indirect  Labor, 

55  Supplies  and  Tools, 

56  Repair  Labor, 

57  Repair  Materials, 

58  Fixed  Plant  Charges. 

Finishing  and   Shipping   Department: 

61  Direct  Finishing  Labor, 

62  Indirect  Finishing  and  Shipping  Labor, 

65  Supplies  and  Tools, 

66  Repair  Labor, 

67  Repair  Materials, 

68  Fixed  Plant  Charges. 

General  Expense: 

70-1  Office   Salaries, 

70-2  Office  Expense, 

70-3  Selling  Expense, 

70-4  Misc.   General   Expense. 

Returns  and  Allowances: 

80    Returns  and  Allowances. 

Pattern   Shop: 

101  Direct  Labor, 

102  Indirect  Labor, 

105     Materials,   Supplies  and  Tools, 
108    Fixed   Charges. 

Carpenter  Shop: 

111  Direct  Labor, 

112  Indirect  Labor, 

115     Materials,  Supplies  and  Tools, 
118    Fixed  Charges. 


130  FOUNDRY  COST  ACCOUNTING 

Blacksmith   Shop: 

122  Indirect  Labor, 

123  Fuel, 

125     Materials,   Supplies'  and  Tools, 
128     Fixed   Charges. 

Fixed  Plant  Charges: 

138  Power,  Heat  and  Light, 

148  Fire  Insurance, 

158  Taxes, 

168  Depreciation, 

178  Medical  and  Hospital, 

188  Liability   Insurance, 

198  Supt.,   General   Foreman,   and   Misc.   Yard   Labor. 

208  Misc.  Plant  Expense. 

Definition  of  Accounts  for  Grey  Iron  Foundries 

METAL 
10-1     Pig  Iron: 

To  include  the  cost  of  all  pig  iron  used,  freight,  and 
labor  in  unloading. 

10-2    Scrap: 

To  include  the  cost  of  all  purchased  scrap,  freight, 
and  labor  in  unloading. 

MELTING  DEPARTMENT 

22  Indirect  Labor: 

To  include  all  labor  identified  with  the  melting  of 
the  iron — handling  and  conveying  iron  and  fuel  to  the 
cupola;  charging;  cranemen;  slag  mill  labor;  foreman; 
etc. 

23  Fuel  : 

To  include  the  cost  of  all  melting  fuel,  freight,  and 
labor  in  unloading. 


CLASSIFICATION  OF  ACCOUNTS  131 

24  Flux : 

To  include  the  cost  of  all  flux,  freight,  and  labor  in 
unloading. 

25  Supplies  and  Tools: 

To  include  the  cost  of  all  supplies  and  small  tools 
used  in  the  melting  department. 

26  Repair   Labor: 

To  include  the  cost  of  all  labor  in  connection  with 
the  up-keep  and  maintenance  of  the  cupolas  and  their 
equipment. 

27  Repair  Materials: 

To  include  the  cost  of  all  materials  used  in  connec- 
tion with  the  up-keep  and  maintenance  of  the  cupolas 
and  their  equipment — brick;  fire  clay;  sand;  lime- 
stone; etc. 

28  Fixed  Plant  Charges: 

To  include  a  proportion  of  such  costs  as  power, 
heat  and  light;  insurance;  taxes;  depreciation;  salary  of 
superintendent,  general  foreman  and  miscellaneous  yard 
labor;  medical  and  hospital;  and  such  other  costs  of 
a  general  nature  that  are  more  or  less  fixed  and  that 
cannot   be   directly   charged  to   any   one   department. 

See  definitions  of  the  above  accounts  for  methods  of 
distributing   them    departmentally. 

29  Laboratory  Expense: 

To  include  salary  of  chemist;  laboratory  expenses; 
labor  and  expense  incurred  in  testing  materials  and  prod- 
uct; etc. 

MOLDING  DEPARTMENT 

31    Direct  Labor: 

To  include  all  labor  of  molders  and  helpers  in  putting 
up  molds;  operating  molding  machines;  green  sand  core 
work;  etc.,  that  is  traceable,  without  pro-rating  to  a  pattern 
number. 


132  FOUNDRY  COST  ACCOUNTING 

If  practicable,  separate  into 

31-1  Direct  Labor,  Bench  Molding. 
31-2  Direct  Labor,  Floor  Molding. 
31-3  Direct  Labor,  Machine  Molding. 

32    Indirect  Labor: 

To  include  all  labor  in  the  foundry  or  for  the  foundry, 
other  than  that  of  putting  up  molds  and  special  pattern 
and  flask  labor — cutting  sand;  shifting;  breaking  gates; 
delivering  castings  to  the  cleaning  and  chipping  room; 
gathering  up  scrap;  lining  ladles;  cleaning  up  department; 
foreman;  etc. 

35  Supplies  and  Tools: 

To  include  the  cost  of  all  supplies  and  small  tools  used 
in  molding — sand;  facing;  pasting;  chaplets ;  molders' 
tools;  etc. 

36  Repair  Labor: 

To  include  the  cost  of  all  labor  in  connection  with 
the  up-keep  and  maintenance  of  the  foundry  equipment, 
other  than  that  of  a  special  nature — patterns;  flasks;  jack- 
ets; bottom  boards;  match  boxes;  core  boxes;  etc.;  also 
labor  for  repairing  molding  machines,  molding  benches, 
etc. 

37  Repair  Materials: 

To  include  the  cost  of  all  materials  used  in  connection 
with  the  up-keep  and  maintenance  of  the  foundry  equip- 
ment, other  than  that  of  a  special  nature — patterns;  flasks; 
jackets;  bottom  boards;  match  boxes;  core  boxes;  molding 
machines;  etc. 

38  Fixed  Plant  Charges: 

To  include  a  proportion  of  such  costs  as  power,  heat 
and  light;  insurance;  taxes;  depreciation;  medical  and  hos- 
pital; and  such  other  costs  of  a  general  nature  that  more 
or  less  fixed  and  that  cannot  be  charged  directly  to  any 
one  department. 


CLASSIFICATION   OF  ACCOUNTS  133 

39     Special  Pattern  and  Flask  Expense: 

To  include  the  cost  of  all  labor  and  materials  used  in 
making  and  repairing  patterns,  flasks,  jackets,  bottom 
boards,  match  boxes,  core  boxes,  rigging  up  molding  ma- 
chines, etc.,  that  is  of  a  special  nature,  and  is  traceable, 
without  pro-rating,  to  a  pattern  number. 

COREMAKING  DEPARTMENT 

41  Direct  Labor: 

To  include  all  labor  of  coremakers  and  helpers  in  mak- 
ing and  assembling  cores,  and  in  operating  core  machines, 
that  is  traceable,  without  pro-rating,  to  a  pattern  number. 

42  Indirect  Labor: 

To  include  all  coreroom  labor  other  than  that  of 
actually  making  cores — sand  mixers;  sand  wheelers;  oven 
tenders;  inspectors;  delivering  cores  to  the  foundry;  clean- 
ing up  department;  etc. 

43  Fuel  : 

To  include  the  cost  of  all  core  fuel,  freight,  and  labor 
in  unloading. 

45  Supplies  and  Tools: 

To  include  the  cost  of  all  supplies  and  small  tools 
used  in  the  coreroom — core  sand ;  core  binders ;  wire ; 
nails;  tools;  etc. 

46  Repair  Labor: 

To  include  the  cost  of  all  labor  in  connection  with 
the  up-keep  and  maintenance  of  the  coreroom  equipment — 
ovens;  racks;  trays;  etc. 

47  Repair  Materials: 

To  include  the  cost  of  all  materials  used  in  connection 
with  the  up-keep  and  maintenance  of  the  coreroom  equip- 
ment— ovens ;  racks ;  trays ;  etc. 


134  FOUNDRY  COST  ACCOUNTING 

48    Fixed  Plant  Charges: 

To  include  a  proportion  of  such  costs  as  power,  heat 
and  light;  insurance;  taxes;  depreciation;  salary  of  super- 
intendent; general  foreman;  and  miscellaneous  yard  labor; 
medical  and  hospital;  and  such  other  costs  of  a  general 
nature  that  are  more  or  less  fixed  and  that  cannot  be 
charged   directly   to   any   one   department- 

See  definitions  of  the  above  accounts  for  methods  of 
distributing  them  departmentally. 

CLEANING  AND  CHIPPING  DEPARTMENT 

52    Indirect  Labor: 

To  include  all  labor  in  the  cleaning  and  chipping  de- 
partment— loading  and  unloading  mills;  operating  sand- 
blast barrels,  tables  and  hose;  chipping;  inspecting;  sorting; 
cleaning  up  department;  foreman;  etc. 

55  Supplies  and  Tools: 

To  include  the  cost  of  all  supplies  and  small  tools 
used  in  the  cleaning  and  chipping  department — sand-blast 
sand;  hose;  stars;  jacks,  chipping  hammers  and  other 
small  tools;  etc. 

56  Repair  Labor: 

To  include  the  cost  of  all  labor  in  connection  with  the 
up-keep  and  maintenance  of  all  cleaning  and  chipping 
equipment — repairs  to  mills,  sand-blast  apparatus,  dust  ar- 
resters, etc. 

57  Repair  Materials: 

To  include  the  cost  of  all  materials  used  in  connection 
with  the  up-keep  and  maintenance  of  all  cleaning  and 
chipping  equipment — repairs  to  mills,  sand-blast  appa- 
ratus,  dust   arresters,   etc. 

58  Fixed  Plant  Charges: 

To  include  a  proportion  of  such  costs  as  power,  heat 
and  light;  insurance;  taxes;  depreciation;  salary  of  super- 


CLASSIFICATION  OF  ACCOUNTS  135 

intendent,  general  foreman,  and  miscellaneous  yard  labor; 
medical  and  hospital;  and  such  other  costs  of  a  general 
nature  that  are  more  or  less  fixed  and  that  cannot  be 
charged  directly  to  any  one  department. 

See  definitions  of  the  above  accounts  for  methods  of 
distributing  them  departmentally. 

FINISHING  AND   SHIPPING   DEPARTMENT 

61  Direct  Finishing  Labor: 

To  include  all  direct  labor  in  the  finishing  department 
that  is  traceable,  without  pro-rating,  to  a  pattern  number, 
such  as  grinding,  punching,  drifting,  drilling,  reaming,  scal- 
ing, etc. 

62  Indirect  Finishing  and  Shipping  Labor: 

To  include  all  indirect  labor  in  the  finishing  and  snip- 
ing department — sorting,  trucking;  inspection;  foreman; 
etc. 

65  Supplies  and  Tools: 

To  include  the  cost  of  all  supplies  and  small  tools 
used  in  finishing  and  shipping  department — emery  wheels; 
press  supplies;  tapping  and  threading  machine  supplies; 
chisels  and  hammers;  oil  and  waste;  sacks;  twine;  needles; 
etc. 

66  Repair  Labor: 

To  include  the  cost  of  all  labor  in  connection  with  the 
up-keep  and  maintenance  of  the  finishing  and  shipping 
room  equipment. 

67  Repair  Materials: 

To  include  cost  of  all  materials  used  in  connection 
with  the  up-keep  and  maintenance  of  the  finishing  and 
shipping  room  equipment. 

68  Fixed  Plant  Charges: 

To  include  a  proportion  of  such  costs  as  power,  heat 
and  light;  insurance;  taxes,  depreciation;  salary  of  super- 


136  FOUNDRY  COST  ACCOUNTING 

intendent,  general  foreman  and  miscellaneous  yard  labor; 
medical  and  hospital;  and  such  other  costs  of  a  general 
nature  that  are  more  or  less  fixed  and  that  cannot  be 
charged  directly  to  any  one  department. 

See  definitions  of  the  above  accounts  for  methods  of 
distributing  them  departmentally. 

GENERAL   EXPENSE 
70-1     Office  Salaries: 

To  include  the  salaries  of  clerks  and  of  all  general 
officers. 

70-2     Office  Expense: 

To  include  all  expense  incidental  to  the  office,  other 
than  selling. 

70-3     Selling  Expense: 

To  include  the  salaries  and  expenses  of  salesmen,  and 
all  expenses  incidental  to  selling,  such  as  advertising,  col- 
lection,  commissions,  etc- 

70-4     Misc.  General  Expense: 

To  include  all  forms  of  miscellaneous  expense  of  a 
general  nature  that  cannot  be  included  elsewhere,  such  as 
membership  dues,  donations,  etc.  Charges  to  this  account 
should  be  made  sparingly. 

RETURNS  AND  ALLOWANCES 
80    Returns  and  Allowances  : 

To  include  a  charge  of  an  amount  per  ton  of  castings 
produced  sufficient  to  cover  the  invoice  price  of  castings 
returned  by  customers,  less  the  scrap  value  thereof. 

Credit  an  account  "Reserve  for  Returns  and  Allow- 
ances." As  castings  are  returned  charge  the  reserve  ac- 
count and  credit  the  customer,  making  a  memorandum 
entry  on  job  cost  card. 


CLASSIFICATION   OF  ACCOUNTS  137 

PATTERN  SHOP 

101  Direct  Labor: 

To  include  all  labor  in  making  and  repairing  patterns, 
core  boxes,  match  boxes,  etc.,  that  is  traceable,  without 
pro-rating,  to  a  pattern  number.  The  balance  of  this  ac- 
count should  be  absorbed  at  the  end  of  month  either 
through  transfer  to  account  No.  39  or  by  direct  charges 
to  customers*  accounts. 

102  Indirect  Labor: 

To  include  all  pattern  shop  labor  that  is  not  practi- 
cable to  trace  to  a  pattern  number. 

105     Materials,  Supplies  and  Tools: 

To  include  the  cost  of  all  materials,  supplies  and  small 
tools  used  in  making  and  repairing  patterns,  core  boxes, 
match  boxes,  etc.  The  greater  part  of  the  balance  of  this 
account  should  be  absorbed,  at  the  end  of  the  month  either 
through  transfer  to  account  No.  39  or  by  direct  charges 
to  customers'  accounts. 

108     Fixed  Charges: 

To  include  such  costs  as  power,  heat  and  light,  insur- 
ance, taxes  and  depreciation,  and  other  costs  of  a  similar 
nature  that  are  more  or  less  fixed. 

CARPENTER   SHOP 

111  Direct  Labor: 

To  include  all  labor  in  making  and  repairing  flasks, 
jackets,  bottom  boards,  etc.,  that  is  traceable  without  pro- 
rating, to  a  pattern  number.  The  balance  of  this  account 
should  be  absorbed,  at  the  end  of  the  month,  either  through 
transfer  to  account  No.  39  or  by  direct  charges  to  cus- 
tomers' accounts. 

112  Indirect  Labor: 

To  include  all  carpenter  shop  labor  that  is  not  prac- 
ticable  to   trace   to   a   pattern   number- 


138  FOUNDRY  COST  ACCOUNTING 

115     Materials,  Supplies  and  Tools: 

To  include  the  cost  of  all  materials,  supplies  and  small 
tools  used  in  making  and  repairing  flasks,  jackets,  bottom 
boards,  etc-  The  greater  part  of  the  balance  of  this 
account  should  be  absorbed  at  the  end  of  the  month  either 
through  transfer  to  acocunt  No.  39,  or  by  direct  charges 
to  customers'  accounts. 

118    Fixed  Charges: 

To  include  such  costs  as  power,  heat  and  light,  insur- 
ance, taxes,  and  depreciation  and  other  costs  of  a  similar 
nature  that  are  more  or  less  fixed. 

BLACKSMITH   SHOP 

122  Indirect  Labor: 

To  include  all  blacksmith  shop  labor — making  and  re- 
pairing pokers,  grate  bars,  etc. 

123  Fuel: 

To  include  the  cost  of  all  blacksmith  fuel,  including 
freight  and  labor  in  unloading. 

125     Materials,  Supplies  and  Tools: 

To  include  the  cost  of  all  materials,  supplies  and  small 
tools  used  in  the  blacksmith  shop. 

128    Fixed  Charges: 

To  include  such  costs  as  power,  heat  and  light,  insur- 
ance, taxes  and  depreciation,  and  other  costs  of  a  similar 
nature  that  are  more  or  less  fixed. 

FIXED   PLANT  CHARGES 
138    Power,  Heat  and  Light: 

To  include  the  cost  of  all  purchased  current;  all  costs 
of  labor,  materials,  supplies  and  expense  in  producing 
power;  labor  and  materials  in  repairing  boiler  and  engine 
room  equipment,  including  air  compressors,  accumulators, 


CLASSIFICATION  OF  ACCOUNTS  139 

pumps,   generators,    transformers,    etc.,   located   in    engine 
room;  boiler  insurance,  etc. 

Distribute  the  balance  of  the  account  at  the  end  of 
each  month  to  the  several  operating  departments  in  accord- 
ance with  the  measured  or  approximated  consumption  of 
power. 

148    Fire  Insurance: 

To  include  all  premiums  for  fire  insurance  and  all 
costs  of  fire  protection. 

Charge  the  account  monthly  and  credit  "Prepaid  In- 
surance" account,  the  entry  being  one-twelfth  of  the  annual 
expense. 

Distribute  the  balance  of  the  account  at  the  end  of 
each  month  to  the  several  operating  departments  on  the 
basis  of  the  approximate  book  value  of  the  department 
investment. 

158    Taxes: 

To  include  all  tax  payments  and  assessments  on  both 
real  and  personal  property. 

Charge  the  account  monthly  and  credit  "Accrued 
Taxes"  account,  the  entry  being  one-twelfth  of  the  annual 
expense. 

Distribute  the  balance  of  the  account  at  the  end  of 
each  month  to  the  several  operating  departments  on  the 
basis  of  the  approximate  book  value  of  the  department 
investment. 

168    Depreciation  : 

To  include  charges  to  cover  the  deterioration  in  the 
value  of  the  buildings  and  equipment  due  to  wear  and 
tear  and  obsolescence. 

Charge  the  account  monthly  and  credit  "Plant  Depre- 
ciation Reserve"  accounts,  the  basis  being  one-twelfth  of 
the  annual  expense. 

Distribute  the  balance  of  the  account  at  the  end  of 
each  month  to  the  several  operating  departments  on  the 


140  FOUNDRY   COST  ACCOUNTING 

basis   of   the   approximate   book   value   of   the   department 
investment- 

178     Medical  and  Hospital: 

To  include  all  forms  of  medical  and  hospital  expense; 
personal  injury  payments  when  not  covered  by  liability 
insurance,  and  legal  expenses  in  connection  therewith;  etc. 

Distribute  the  balance  of  the  account  at  the  end  of  the 
month  to  the  several  operating  departments  on  the  basis  of 
the  total  departmental  labor. 

188    Liability  Insurance: 

To  include  monthly  premiums  on  employer's  liability 
insurance  policies. 

Distribute  the  balance  of  the  account  at  the  end  of 
each  month  to  the  several  operating  departments  on  the 
basis  of  the  total  departmental  labor. 

198     Supt.,  General  Foreman,  and  Misc.  Yard  Labor: 

To  include  the  salary  of  the  superintendent,  general 

foreman  and  all  miscellaneous  yard  labor. 

Distribute  the  balance  of   the  account  at  the  end   of 

each  month  to  the  several  operating  departments   on   the 

basis   of   the   total   departmental   labor. 

208    Misc.  Plant  Expense: 

To  include  all  forms  of  miscellaneous  plant  expense 
of  a  general  nature  not  included  elsewhere,  such  as  water 
rent;  employees'  welfare;  etc.  Charges  to  this  account 
should    be    made    sparingly. 

Distribute  the  balance  of  the  account  at  the  end  of 
each  month  to  the  several  operating  departments  in  an 
equitable  way,  the  bases  depending  upon  the  nature  of  the 
expense. 

Classification  of  Accounts  for  Malleable  Iron  Foundries 
Metal  : 

10-1     Pig  Iron. 


CLASSIFICATION   OF  ACCOUNTS  141 

10-2     Malleable  Scrap. 
10-3     Steel  Scrap. 

Melting  Department: 

22  Indirect  Labor. 

23  Fuel. 

25  Supplies  and  Tools. 

26  Repair  Labor. 

27  Repair  Materials. 

28  Fixed   Plant   Charges. 

29  Laboratory  Expense. 

Molding  Department: 

31  Direct  Labor. 

31-1  Direct  Labor — Bench  Molding. 
31-2  Direct  Labor — Floor  Molding. 
31-3     Direct  Labor — Machine  Molding. 

32  Indirect  Labor. 

35  Supplies  and  Tools. 

36  Repair  Labor. 

37  Repair  Materials. 

38  Fixed   Plant   Charges. 

39  Special  Pattern  and  Flask  Expense. 

Coremaking  Department  : 

41  Direct  Labor. 

42  Indirect  Labor. 

43  Fuel- 

45  Supplies  and  Tools. 

46  Repair  Labor. 

47  Repair  Materials. 

48  Fixed  Plant  Charges- 

Hard  Iron  Cleaning  Department: 

52    Indirect  Labor. 

55  Supplies    and   Tools. 

56  Repair  Labor. 


142  FOUNDRY  COST  ACCOUNTING 

57  Repair  Materials. 

58  Fixed  Plant  Charges. 

Trimming  and  Inspecting  Department: 
62     Indirect  Labor. 

65  Supplies  and  Tools. 

66  Repair  Labor. 

67  Repair  Materials. 

68  Fixed  Plant  Charges. 

Annealing  Department: 

72  Indirect  Labor. 

73  Fuel. 

74  Pots  and  Bottoms. 

75  Supplies  and  Tools. 

76  Repair  Labor. 

77  Repair  Materials. 

78  Fixed  Plant  Charges. 

Soft  Iron  Cleaning  Department: 
82     Indirect  Labor. 

85  Supplies    and   Tools. 

86  Repair  Labor. 

87  Repair  Materials. 

88  Fixed  Plant  Charges. 

Finishing  and  Shipping  Department: 

91  Direct  Finishing  Labor. 

92  Indirect  Finishing  and  Shipping  Labor. 

95  Supplies  and  Tools. 

96  Repair  Labor. 

97  Repair  Materials. 

98  Fixed    Plant   Charges. 
General  Expense: 

110-1  Office  Salaries. 

110-2  Office  Expense. 

110-3  Selling  Expense. 

110-4  Misc.  General  Expense. 


CLASSIFICATION  OF  ACCOUNTS  143 

Returns  and  Allowances: 

120  Returns   and   Allowances. 

Pattern  Shop: 

121  Direct  Labor. 

122  Indirect  Labor. 

125     Materials,  Supplies  and  Tools. 
128     Fixed  Charges. 

Carpenter  Shop: 

131  Direct  Labor. 

132  Indirect  Labor. 

135     Materials,  Supplies  and  Tools. 
138    Fixed  Charges. 

Blacksmith  Shop: 

142  Indirect  Labor. 

143  Fuel. 

145     Materials,    Supplies   and   Tools. 
148     Fixed  Charges. 

Fixed  Plant  Charges: 

158  Power,  Heat  and  Light. 

168  Fire  Insurance. 

178  Taxes. 

188  Depreciation. 

198  Medical  and  Hospital. 

208  Liability    Insurance. 

218  Supt,  General  Foreman,  and  Misc.  Yard  Labor. 

228  Misc.  Plant  Expense. 

Definition  of  Accounts  for  Malleable  Iron  Foundries 

METAL 
10-1    Pig  Iron: 

To  include  the  cost  of  all  pig  iron  used,  freight,  and 
labor  in  unloading. 


144  FOUNDRY   COST  ACCOUNTING 

10-2     Malleable  Scrap: 

To  include  the  cost  of  all  purchased  malleable  scrap 
used,  freight,  and  labor  in  unloading. 

10-3     Steel  Scrap: 

To  include  the  cost  of  all  steel  scrap  used,  freight  and 
labor  in  unloading. 

MELTING  DEPARTMENT 

22  Indirect  Labor: 

To  include  all  labor  identified  with  the  melting  of  the 
iron — handling  and  conveying  iron  and  fuel  to  the  furnace ; 
charging;  skimming;  firemen;  crancmen;  slag  mill  labor; 
foreman ;   etc. 

23  Fuel  : 

To  include  the  cost  of  all  steel  scrap  used,  freight, 
and  labor  in  unloading. 

25  Supplies  and  Tools: 

To  include  the  cost  of  all  supplies  and  small  tools  used 
at  the  melting  furnace. 

26  Repair  Labor: 

To  include  the  cost  of  all  labor  in  connection  with  the 
up-keep  and  maintenance  of  the  melting  furnaces  and  their 
equipment. 

27  Repair  Materials: 

To  include  the  cost  of  all  materials  used  in  connection 
with  the  up-keep  and  maintenance  of  the  melting  furnaces 
and  their  equipment — fire  brick,  fire  clay,  furnace  sand,  etc. 

28  Fixed  Plant  Charges: 

To  include  a  proportion  of  such  costs  as  power,  heat 
and  light;  insurance;  taxes;  depreciation;  salary  of  super- 
intendent, general  foreman,  and  all  miscellaneous  yard 
labor ;  medical  and  hospital ;  and  such  other  costs  of  a  gen- 


CLASSIFICATION   OF  ACCOUNTS  145 

eral   nature  that   are   more   or   less   fixed   and   that   cannot 
be  directly  charged  to  any  one  department. 

See  definitions  of  the  above  accounts  for  methods  of 
distributing  them  departmentally. 

29     Laboratory  Expense: 

To  include  salary  of  chemist;  laboratory  expenses; 
labor  and  expense  incurred  in  testing  products;   etc. 

MOLDING   DEPARTMENT 

31  Direct  Labor: 

To  include  all  labor  of  molders  and  helpers  in  putting 
up  molds ;  operating  molding  machines ;  green  sand  core 
work ;  etc.,  that  is  traceable,  without  pro-rating,  to  a  pat- 
tern number. 

If   practicable,  separate  into: — 

31-1  Direct  Labor,  Bench  Molding. 
31-2  Direct  Labor,  Floor  Molding. 
31-3     Direct  Labor,  Machine  Molding. 

32  Indirect  Labor: 

To  include  all  labor  in  the  foundry  or  for  the  foundry, 
other  than  that  of  putting  up  molds  and  special  pattern  and 
flask  labor — cutting  sand;  shifting;  breaking  gates;  deliv- 
ering castings  to  the  hard  iron  cleaning  room;  gathering 
up  scrap ;  lining  ladles ;  cleaning  up  department ;.  foreman ; 
etc. 

35  Supplies  and  Tools  : 

To  include  the  cost  of  all  supplies  and  small  tools 
used  in  the  foundry — molding  sand;  facing;  pasting;  chap- 
lets  ;  molders'  tools ;  etc. 

36  Repair  Laeor: 

To  include  the  cost  of  all  labor  in  connection  with 
the  up-keep  and  maintenance  of  the  foundry  equipment, 
other  than  that  of  a  special  nature — patterns;  flasks;  jack- 


146  FOUNDRY  COST  ACCOUNTING 

ets;  bottom  boards;  match  boxes;  core  boxes;  etc.;  also 
labor  in  repairing  molding  machines,  molding  benches,  etc. 

37  Repair  Materials: 

To  include  the  cost  of  all  materials  used  in  connection 
with  the  up-keep  and  maintenance  of  the  foundry  equip- 
ment other  than  that  of  a  special  nature — patterns;  flasks; 
jackets;  bottom  boards;  match  boxes;  core  boxes;  etc.; 
also  material  for  repairing  molding  machines,  molding 
benches,  etc. 

38  Fixed  Plant  Charges: 

To  include  a  proportion  of  such  costs  as  power,  heat 
and  light;  insurance;  taxes;  depreciation;  salary  of  super- 
intendent, general  foreman,  and  all  miscellaneous  yard 
labor;  medical  and  hospital;  and  such  other  costs  of  a 
general  nature  that  are  more  or  less  fixed  and  that  cannot 
be  charged  directly  to  any  one  department. 

See  definitions  of  the  above  accounts  for  methods  of 
distributing   them    departmentally. 

39  Special  Pattern  and  Flask  Expense: 

To  include  the  cost  of  all  labor  and  materials  used  in 
making  and  repairing  patterns,  flasks,  jackets,  bottom 
boards,  match  boxes,  core  boxes,  rigging  up  molding 
machines,  etc.,  that  is  of  a  special  nature,  and  is  traceable, 
without  pro-rating,  to  a  pattern  number. 

COREMAKING  DEPARTMENT 

41  Direct  Labor: 

To  include  all  labor  of  coremakers  and  helpers  in 
making  and  assembling  cores,  and  in  operating  core  ma- 
chines, that  is  traceable,  without  pro-rating,  to  a  pattern 
number. 

42  Indirect  Labor: 

To  include  all  coreroom  labor  other  than  that  of 
actually  making  cores — sand  mixers ;  sand  wheelers ;  oven 


CLASSIFICATION   OF  ACCOUNTS  147 

tenders ;  inspectors ;  delivering  cores  to  the  foundry ;  clean- 
ing up  department;  etc. 

43    Fuel  : 

To  include  the  cost  of  all  core  fuel,  freight  and  labor 
in   unloading. 

45  Supplies  and  Tools: 

To  include  the  cost  of  all  supplies  and  tools  used  in 
the  coreroom — core  sand;  core  binders;  wire;  nails;  tools; 
etc. 

46  Repair  Labor: 

To  include  the  cost  of  all  labor  in  connection  with 
the  up-keep  and  maintenance  of  the  coreroom  equipment — 
ovens;  racks;  trays;  etc. 

47  Repair  Materials: 

To  include  the  cost  of  all  materials  used  in  connection 
with  the  up-keep  and  maintenance  of  the  coreroom  equip- 
ment— ovens;  racks;  trays;  etc. 

48  Fixed  Plant  Charges: 

To  include  a  proportion  of  such  costs  as  power,  heat 
and  light;  insurance;  taxes;  depreciation;  salary  of  super- 
intendent, general  foreman,  and  all  miscellaneous  yard 
labor;  medical  and  hospital;  and  such  other  costs  of  a 
general  nature  that  are  more  or  less  fixed  and  that  cannot 
be  charged  directly  to  any  one  department. 

See  definitions  of  the  above  accounts  for  methods  of 
distributing  them  departmentally. 

HARD  IRON   CLEANING  DEPARTMENT 
52    Indirect  Labor: 

To  include  all  labor  in  the  hard  iron  cleaning  depart- 
ment— loading  and  unloading  mills;  operating  sand-blast 
barrels,  tables  and  hose ;  delivering  castings  to  the  trimming 
room ;  cleaning  up  department ;  foreman ;  etc. 


148  FOUNDRY   COST  ACCOUNTING 

55  Supplies  and  Tools  : 

To  include  the  cost  of  all  supplies  and  small  tools  used 
in  the  hard  iron  cleaning  department — sand-blast  sand; 
hose ;  stars  ;  jacks ;  small  tools ;  etc. 

56  Repair  Labor: 

To  include  the  cost  of  all  labor  in  connection  with 
the  up-keep  and  maintenance  of  all  hard  iron  cleaning 
equipment — repairs  to  mills,  sand-blast  apparatus,  dust 
arresters,  etc. 

57  Repair  Materials: 

To  include  the  cost  of  all  materials  used  in  connection 
with  the  up-keep  and  maintenance  of  all  hard  iron  cleaning 
equipment — repairs  to  mills,  sand-blast  apparatus,  dust 
arresters,  etc. 

58  Fixed  Plant  Charges: 

To  include  a  proportion  of  such  costs  as  power,  heat 
and  light ;  insurance ;  taxes ;  depreciation ;  salary  of  super- 
intendent, general  foreman,  and  all  miscellaneous  yard 
labor;  medical  and  hospital;  and  such  costs  of  a  general 
nature  that  are  more  or  less  fixed  and  that  cannot  be 
charged  directly  to  any  one  department. 

See  definitions  of  the  above  accounts  for  methods  of 
distributing  them  departmentally. 

TRIMMING  AND  INSPECTING  DEPARTMENT 

62     Indirect  Labor: 

To  include  all  labor  in  the  trimming  and  inspecting 
room — trimming;  inspecting;  counting;  sorting;  delivering 
castings  to  the  annealing  department;  cleaning  up  depart- 
ment;  foreman;   etc. 

65     Supplies  and  Tools: 

To  include  the  cost  of  supplies  and  small  tools  used  in 
the  trimming  and  inspecting  department — chipping  ham- 
mers ;  chipping  benches ;  etc. 


CLASSIFICATION   OF  ACCOUNTS  149 

66  Repair  Labor: 

To  include  the  cost  of  all  labor  in  connection  with  the 
up-keep  and  maintenance  of  the  trimming  room  equipment. 

67  Repair  Materials: 

To  include  the  cost  of  all  materials  used  in  connection 
with  the  up-keep  and  maintenance  of  the  trimming  room 
equipment. 

68  Fixed  Plant  Charges: 

To  include  a  proportion  of  such  costs  as  power,  heat 
and  light;  insurance;  taxes;  depreciation;  salary  of  super- 
intendent, general  foreman,  and  all  miscellaneous  yard 
labor;  medical  and  hospital;  and  such  other  costs  of  a 
general  nature  that  are  more  or  less  fixed  and  that  cannot 
be  directly  charged  to  any  one  department. 

See  definitions  of  the  above  accounts  for  methods  of 
distributing  them   departmentally. 

ANNEALING  DEPARTMENT 

72  Indirect  Labor: 

To  include  the  cost  of  all  labor  in  the  annealing  de- 
partment— packing;  filling  and  emptying  ovens;  opening 
and  closing  oven  doors ;  shaking  out  castings  and  delivering 
to  the  soft  iron  cleaning  department;  hauling  in  coal  and 
removing  ashes;  firemen;  disposition  of  old  pots  and  bot- 
toms;  cleaning  up   department;   cranemen;    foreman;   etc. 

73  Fuel  : 

To  include  the  cost  of  all  annealing  fuel,  freight  and 
labor  in  unloading. 

74  Pots  and  Bottoms: 

To  include  the  cost  of  all  purchased  pots  and  bottoms; 
also  the  direct  costs  of  producing  pots  and  bottoms. 


150  FOUNDRY  COST  ACCOUNTING 

75  Supplies  and  Tools: 

To  include  the  cost  of  all  supplies  and  small  tools  used 
in  the  annealing  department — packing  materials;  depart- 
ment and  oven  tools;  etc. 

76  Repair  Labor: 

To  include  the  cost  of  all  labor  in  connection  with 
the  up-keep,  and  maintenance  of  the  annealing  ovens  and 
their  equipment — including  repairs  to  cranes,  oven  trucks, 
etc. 

77  Repair  Materials: 

To  include  the  cost  of  materials  used  in  connection 
with  the  up-keep,  and  maintenance  of  the  annealing  ovens 
and  their  equipment — fire  brick;  bungs;  etc.,  including  re- 
pairs to  cranes  and  oven  trucks. 

78  Ejxed  Plant  Charges: 

To  include  a  proportion  of  such  costs  as  power,  heat 
and  light;  insurance;  taxes;  depreciation;  salary  of  super- 
intendent, general  foreman,  and  all  miscellaneous  yard 
labor;  medical  and  hospital;  and  such  other  costs  of  a 
general  nature  that  are  more  or  less  fixed  and  that  cannot 
be  charged  directly  to  any  one  department. 

See  definitions  of  the  above  accounts  for  methods  of 
distributing  them  departmentally. 

SOFT  IRON  CLEANING  DEPARTMENT 

82    Indirect  Labor: 

To  include  all  labor  in  the  soft  iron  cleaning  depart- 
ment— loading  and  unloading  mills;  operating  sand-blast 
barrels,  tables  and  hose ;  delivering  castings  to  the  finishing 
room;  cleaning  up  department;  foreman;  etc. 

85     Supplies  and  Tools: 

To  include  the  cost  of  all  supplies  and  small  tools  used 
in  the  soft  iron  cleaning  department — sand-blast  sand; 
hose;  stars;  jacks;  small  tools;  etc. 


CLASSIFICATION  OF  ACCOUNTS  151 

86  Repair  Labor: 

To  include  the  cost  of  all  labor  in  connection  with  the 
up-keep  and  maintenance  of  all  soft  iron  cleaning  equip- 
ment— repairs  to  mills,  sand-blast  apparatus,  dust  arresters, 
etc. 

87  Repair  Materials: 

To  include  the  cost  of  all  materials  used  in  connection 
with  the  up-keep  and  maintenance  of  all  soft  iron  cleaning 
equipment — repairs  to  mills,  sand-blast  apparatus,  dust 
arrestors,  etc. 

88  Fixed  Plant  Charges: 

To  include  a  proportion  of  such  costs  as  power,  heat 
and  light;  insurance;  taxes;  depreciation;  salary  of  super- 
intendent, general  foreman,  and  all  miscellaneous  yard 
labor;  medical  and  hospital;  and  such  other  costs  of  a 
general  nature  that  are  more  or  less  fixed  and  that  cannot 
be  charged  directly  to  any  one  department. 

See  definitions  of  the  above  accounts  for  methods  of 
distributing  them  departmentally. 

FINISHING  AND  SHIPPING  DEPARTMENT 

91  Direct  Finishing  Labor: 

To  include  all  direct  labor  in  the  finishing  department, 
that  is  traceable,  without  pro-rating,  to  a  pattern  number, 
such  as  grinding,  punching,  drifting,  drilling,  reaming, 
scaling,  etc. 

92  Indirect  Finishing  and  Shipping  Labor: 

To  include  all  indirect  labor  in  the  finishing  and  ship- 
ping department — sorting;  loading;  trucking;  inspection; 
foreman;  etc. 

95    Supplies  and  Tools: 

To  include  the  cost  of  all  supplies  and  small  tools 
used    in    the    finishing    and    shipping    department — emery 


152  FOUNDRY   COST  ACCOUNTING 

wheels ;  press  supplies ;  tapping  and  threading  machine  sup- 
plies;  chisels  and  hammers,  oil  and  waste;  sacks;  twine; 
needles;   etc. 

96  Repair   Labor  : 

To  include  the  cost  of  all  labor  in  connection  with  the 
up-keep  and  maintenance  of  the  finishing  and  shipping 
equipment. 

97  Repair  Materials: 

To  include  the  cost  of  all  materials  used  in  connection 
with  the  up-keep  and  maintenance  of  the  finishing  and 
shipping  equipment. 

98  Fixed  Plant  Charges: 

To  include  a  proportion  of  such  costs  as  power,  heat 
and  light ;  insurance ;  taxes ;  depreciation ;  salary  of  super- 
intendent, general  foreman,  and  all  miscellaneous  yard 
labor ;  medical  and  hospital ;  and  such  other  costs  of  a 
general  nature  that  are  more  or  less  fixed  and  that  cannot 
be  charged  directly  to  any  one  department. 

See  definitions  of  the  above  accounts  for  methods  of 
distributing  them  departmentally. 

GENERAL  EXPENSE 

110-1     Office  Salaries: 

To  include  the  salaries  of  clerks  and  of  all  general 
officers. 

110-2     Office  Expense: 

To  include  all  expense  incidental  to  the  office,  other 
than   selling. 

110-3     Selling  Expense: 

To  include  the  salaries  and  expenses  of  salesmen,  and 
all  expenses  incidental  to  selling,  such  as  advertising,  col- 
lection, commissions,  etc. 


CLASSIFICATION   OF  ACCOUNTS  153 

110-4     Misc.  General  Expense: 

To  include  all  forms  of  miscellaneous  expense  of  a 
general  nature  that  cannot  be  included  elsewhere,  such  as 
membership  dues,  donations,  etc.  Charges  to  this  account 
should  be  made  sparingly. 

RETURNS  AND  ALLOWANCES 

120  Returns  and  Allowances: 

To  include  a  charge  of  an  amount  per  ton  of  castings 
produced  sufficient  to  cover  the  invoice  price  of  castings 
returned  by  customers,  less  the  scrap  value  thereof. 

Credit  an  account  "Reserve  for  Returns  and  Allow- 
ances." As  castings  are  returned  charge  the  reserve  ac- 
count and  credit  the  customer,  making  a  memorandum  entry 
on  job  cost  card. 

PATTERN  SHOP 

121  Direct  Labor: 

To  include  all  labor  in  making  and  repairing  patterns, 
core  boxes,  match  boxes,  etc.,  that  is  traceable,  without  pro- 
rating, to  a  pattern  number.  The  balance  of  this  account 
should  be  absorbed  at  end  of  month  either  through  transfer 
to  account  No.  39  or  by  direct  charges  to  customers'  ac- 
counts. 

122  Indirect  Labor: 

To  include  all  pattern  shop  labor  that  is  not  practicable 
to  trace  to  a  pattern  number. 

125     Materials,  Supplies  and  Tools: 

To  include  the  cost  of  all  materials,  supplies,  and  small 
tools  used  in  making  and  repairing  patterns,  core  boxes, 
match  boxes,  etc.  The  greater  part  of  the  balance  of  this 
account  should  be  absorbed  at  the  end  of  the  month  either 
through  transfer  to  account  No.  39  or  by  direct  charges 
to  customers'  accounts. 


154  FOUNDRY  COST  ACCOUNTING 

128    Fixed  Charges: 

To  include  such  costs  as  power,  heat  and  light,  insur- 
ance, taxes,  and  depreciation,  and  other  costs  of  a  similar 
nature  that  are  more  or  less  fixed. 

CARPENTER  SHOP 

131  Direct  Labor: 

To  include  all  labor  in  making  and  repairing  flasks, 
jackets,  bottom  boards,  etc.,  that  is  traceable  without  pro- 
rating to  a  pattern  number.  The  balance  of  this  account 
should  be  absorbed  at  the  end  of  the  month  either  through 
transfer  to  account  No.  39  or  by  direct  charges  to  cus- 
tomers' accounts. 

132  Indirect  Labor: 

To  include  all  carpenter  shop  labor  that  is  not  prac- 
ticable to  trace  to  a  pattern  number. 

135     Materials,  Supplies  and  Tools: 

To  include  the  cost  of  all  materials,  supplies  and  small 
tools  used  in  making  and  repairing  flasks,  jackets,  bottom 
boards,  etc.  The  greater  part  of  the  balance  of  this 
account  should  be  absorbed  at  the  end  of  the  month  either 
through  transfer  to  account  No.  39,  or  by  direct  charges 
to  customers'  accounts. 

138    Fixed  Charges: 

To  include  such  costs  as  power,  heat  and  light,  insur- 
ance, taxes,  and  depreciation  and  other  costs  of  a  similar 
nature  that  are  more  or  less  fixed. 

BLACKSMITH   SHOP 

142    Indirect  Labor: 

To  include  all  blacksmith  shop  labor — making  and 
repairing  pokers,  grate  bars,  etc. 


CLASSIFICATION  OF  ACCOUNTS  155 


143    Fuel  : 


To  include  the  cost  of  all  blacksmith  fuel,  including 
freight  and  labor  in  unloading. 

145    Materials,  Supplies  and  Tools: 

To  include  the  cost  of  all  materials,  supplies  and  small 
tools  used  in  the  blacksmith  shop. 

148    Fixed    Charges  : 

To  include  such  costs  as  power,  heat  and  light,  insur- 
ance, taxes  and  depreciation,  and  other  costs  of  a  similar 
nature  that  are  more  or  less  fixed. 

FIXED  PLANT  CHARGES 
158    Power,  Heat  and  Light: 

To  include  the  cost  of  all  purchased  current;  all  costs 
of  labor,  materials,  supplies  and  expense  in  producing 
power;  labor  and  materials  in  repairing  boiler  and  engine 
room  equipment,  including  air  compressors,  accumulators, 
pumps,  generators,  etc.,  located  in  engine  room;  boiler  in- 
surance, etc. 

Distribute  the  balance  of  the  account  at  the  end  of 
each  month  to  the  several  operating  departments  in  accord- 
ance with  the  measured  or  approximated  consumption  of 
power. 

168    Fire  Insurance: 

To  include  all  payments  for  fire  insurance  and  all  costs 
of  fire  protection. 

Charge  the  account  monthly  and  credit  "Prepaid  In- 
surance" account,  the  entry  being  one-twelfth  of  the  annual 
expense. 

Distribute  the  balance  of  the  account  at  the  end  of 
each  month  to  the  several  operating  departments  on  the 
basis  of  the  approximate  book  value  of  the  department 
investment. 


156  FOUNDRY   COST  ACCOUNTING 

178     Taxes: 

To  include  all  tax  payments  and  assessments  on  both 
real  and  personal  property. 

Charge  the  account  monthly  and  credit  "Accrued 
Taxes"  account,  the  entry  being  one-twelfth  of  the  annual 
expense. 

Distribute  the  balance  of  the  account  at  the  end  of 
each  month  to  the  several  operating  departments  on  the 
basis  of  the  approximate  book  value  of  the  department 
investment. 

188     Depreciation  : 

To  include  charges  to  cover  the  deterioration  in  the 
value  of  the  buildings  and  equipment  due  to  wear  and  tear 
and  obsolescence. 

Charge  the  account  monthly  and  credit  Buildings  and 
Equipment  Depreciation  Reserve  accounts,  the  basis  being 
one-twelfth  of  the  annual  expense. 

Distribute  the  balance  of  the  account  at  the  end  of 
each  month  to  the  several  operating  departments  on  the 
basis  of  the  approximate  book  value  of  the  department 
investment. 

198     Medical  and  Hospital: 

To  include  all  forms  of  medical  and  hospital  expense; 
personal  injury  payments  when  not  covered  by  liability 
insurance,  and  legal  expenses  in  connection  therewith;  etc. 

Distribute  the  balance  of  the  account  at  the  end  of 
each  month  to  the  several  operating  departments  on  the 
basis  of  the  total  departmental  labor. 

208     Liability  Insurance: 

To  include  monthly  premiums  on  employer's  liability 
insurance  policies. 

Distribute  the  balance  of  the  account  at  the  end  of 
each  month  to  the  several  operating  departments  on  the 
basis  of  the  total  departmental  labor. 


CLASSIFICATION   OF  ACCOUNTS  157 

218    Supt.,  General  Foreman  and  Misc.  Yard  Labor: 

To  include  the  salary  of   the  superintendent,  general 

foreman,  and  all  miscellaneous  yard  labor. 

Distribute  the  balance  of   the  account  at  the  end  of 

each  month  to  the   several  operating  departments  on  the 

basis  of  the  total  departmental  labor. 

228     Misc.  Plant  Expense: 

To  include  all  forms  of  miscellaneous  plant  expense  of 
a  general  nature  not  included  elsewhere,  such  as  water 
rent ;  employes'  welfare ;  etc.  Charges  to  this  account 
should  be  made  sparingly. 

Distribute  the  balance  of  the  account  at  the  end  of 
each  month  to  the  several  operating  departments  in  an 
equitable  way,  the  bases  depending  upon  the  nature  of  the 
expense. 

Classification    of    Accounts    for    Steel    Foundries 

Metal  : 

10-1  Pig  Iron. 

10-2  Steel    Scrap. 

10-3  Cast  Scrap 

10-4  Turnings. 

10-5  Ferro-Manganese. 

10-6  Ferro-Silicon. 

10-7  Spiegeleisen. 

10-8  Aluminum. 

10-9  Misc.    Metals. 

Melting  Department: 

22  Indirect  Labor. 

23  Electric  Current   (or  Fuel). 

24  Electrodes. 

25  Supplies  and  Tools. 

26  Repair  Labor. 

27  Repair  Materials. 


158  FOUNDRY  COST  ACCOUNTING 

28  Fixed  Plant  Charges. 

29  Laboratory  Expense. 

For   the   converter   process,   separate   accounts    should 
be  kept  for  melting  and  for  conversion. 

Molding  Department: 

31  Direct  Labor. 

31-1     Direct  Labor — Bench   Molding. 
31-2     Direct  Labor — Floor  Molding. 
31-3     Direct  Labor — Machine  Molding. 

32  Indirect  Labor. 

35  Supplies  and  Tools. 

36  Repair  Labor. 

37  Repair  Materials. 

38  Fixed  Plant  Charges. 

39  Special  Pattern  and  Flask  Expense. 

COREMAKING   DEPARTMENT: 

41  Direct  Labor. 

42  Indirect  Labor. 

43  Fuel. 

45  Supplies  and  Tools. 

46  Repair  Labor. 

47  Repair  Materials. 

48  Fixed  Plant  Charges. 

Cleaning  and  Trimming   Department: 
52    Indirect  Labor. 

55  Supplies  and  Tools. 

56  Repair  Labor. 

57  Repair  Materials. 

58  Fixed  Plant  Charges. 

Annealing  Department: 

62  Indirect  Labor. 

63  Fuel. 

65  Supplies  and  Tools. 

66  Repair  Labor. 


CLASSIFICATION  OF  ACCOUNTS  159 

67  Repair   Materials. 

68  Fixed   Plant   Charges. 

Finishing  and  Shipping  Department: 

71  Direct  Finishing  Labor. 

72  Indirect  Finishing  and  Shipping  Labor. 

75  Supplies  and  Tools. 

76  Repair  Labor. 

77  Repair  Materials. 

78  Fixed   Plant   Charges. 

General  Expense: 

80-1  Office  Salaries. 

80-2  Office  Expense. 

80-3  Selling  Expense. 

80-4  Misc.  General  Expense. 

Returns  and  Allowances: 

90    Returns  and  Allowances. 

Pattern  Shop: 

101  Direct  Labor. 

102  Indirect  Labor. 

105     Materials,    Supplies   and   Tools. 
108     Fixed  Charges. 

Carpenter  Shop: 

111  Direct  Labor. 

112  Indirect  Labor. 

115     Materials,  Supplies  and  Tools. 
118     Fixed   Charges. 

Blacksmith  Shop: 

122  Indirect  Labor. 

123  Fuel. 

125     Materials,   Supplies  and  Tools. 
128    Fixed  Charges. 


160  FOUNDRY   OQST  ACCOUNTING 

Fixed  Plant  Charges: 

138  Power,  Heat  and  Light. 

148  Fire  Insurance. 

158  Taxes. 

168  Depreciation. 

178  Medical  and  Hospital. 

188  Liability    Insurance. 

198  Supt.,  General  Foreman,  and  Misc.  Yard  Labor. 

208  Misc.  Plant  Expense. 

Definition  of  Accounts  for  Steel  Foundries 

METAL 
10-1     Pig  Iron: 

To  include  the  cost  of  all  pig  iron  used,   freight,  and 
labor  in  unloading. 

10-2     Steel  Scrap: 

To  include  the  cost  of  all  steel  scrap  used,  freight,  and 
labor  in  unloading. 

10-3     Cast  Scrap: 

To  include  the  cost  of  all  cast  scrap  used,  freight,  and 
labor  in  unloading. 

10-4     Turnings: 

To  include  the  cost  of  all  turnings  used,  freight,  and 
labor  in  unloading. 

10-5     Ferro-Manganese: 

To    include    the    cost    of    all    ferro-manganese    used, 
freight,  and  labor  in  unloading. 

10-6    Ferro-Silicon  : 

To  include  the  cost  of   all   ferro-silicon  used,   freight, 
and    labor   in   unloading. 

10-7     Spiegeleisen  : 

To  include  the  cost  of   all   spiegeleisen   used,    freight, 
and   labor   in   unloading. 


CLASSIFICATION  OF  ACCOUNTS  161 

10-8    Aluminum 

To  include  the  cost  of  all  aluminum  used,  freight,  and 
labor  in  unloading. 

10-9    Misc.  Metals: 

To  include  the  cost  of  all  miscellaneous  metals  used, 
freight,  and  labor  in  unloading. 

MELTING   DEPARTMENT 

22  Indirect  Labor: 

To  include  all  labor  identified  with  the  melting  of  the 
iron — handling  and  conveying  iron  and  fuel  to  the  furnace ; 
charging ;  cranemen ;  slag  mill  labor ;  foreman ;  etc. 

23  Electric  Current: 

To  include  the  cost  of  all  electric  current  consumed. 

24  Electrodes : 

To  include  the  cost  of  all  electrodes  used. 

25  Supplies  and  Tools: 

To  include  the  cost  of  all  supplies  and  small  tools  used 
at  the  melting  furnace. 

26  Repair  Labor: 

To  include  the  cost  of  all  labor  in  connection  with 
the  up-keep  and  maintenance  of  the  melting  furnaces  and 
their  equipment. 

27  Repair  Materials: 

To  include  the  cost  of  all  materials  used  in  connec- 
tion with  the  up-keep  and  maintenance  of  the  melting 
furnaces  and  their  equipment — fire  brick;  fire  clay;  sand; 
limestone;  etc. 

28  Fixed  Plant  Charges: 

To  include  a  proportion  of  such  costs  as  power,  heat 
and  light;  insurance;  taxes;  depreciation;  salary  of  super- 
intendent, general  foreman,  antl  miscellanebus  yard  labor; 


162  FOUNDRY   COST  ACCOUNTING 

medical  and  hospital;  and  such  other  costs  of  a  general 
nature  that  are  more  or  less  fixed  and  that  cannot  be 
directly   charged   to   any   one   department. 

See  definitions  of  the  above  accounts  for  methods  of 
distributing    them    departmentally. 

29    Laboratory  Expense: 

To  include  salary  of  chemist;  laboratory  expenses; 
labor  and  expense  incurred  in  testing  products;  etc. 

MOLDING  DEPARTMENT 

31  Direct  Labor: 

To  include  all  labor  of  molders  and  helpers  in  putting 
up  molds ;  operating  molding  machines ;  green  sand  core 
work;  etc.,  that  is  traceable,  without  pro-rating,  to  a  pat- 
tern number. 

If  practicable,   separate   into — 
31-1     Direct  Labor,  Bench  Molding. 
31-2     Direct   Labor,   Floor  Molding. 
31-3     Direct  Labor,  Machine  Molding. 

32  Indirect  Labor: 

To  include  all  labor  in  the  foundry  or  for  the  foundry, 
other  than  that  of  putting  up  molds  and  special  pattern  and 
flask  labor — cutting  sand;  shifting;  cutting  gates;  deliv- 
ering castings  to  the  cleaning  and  trimming  room;  gather- 
ing up  scrap;  lining  ladles;  cleaning  up  department;  fore- 
man; etc. 

35  Supplies  and  Tools: 

To  include  the  cost  of  all  supplies  and  small  tools 
used  in  the  foundry — molding  sand;  facing;  pasting;  chap- 
lets;  molders5  tools;  etc. 

36  Repair  Labor: 

To  include  the  cost  of  all  labor  in  connection  with 
the  up-keep  and  maintenance  of  the  foundry  equipment, 
other  than  that  of  a  special  nature — patterns;  flasks;  jack- 


CLASSIFICATION  OF  ACCOUNTS  163 

ets ;  bottom  boards ;  match  boxes ;  core  boxes ;  etc. ;  also 
labor  for  repairing  molding  machines,  molding  benches, 
etc. 

37  Repair  Materials: 

To  include  the  cost  of  materials  used  in  connection 
with  the  up-keep  and  maintenance  of  the  foundry  equip- 
ment, other  than  that  of  a  special  nature — patterns;  flasks; 
jackets;  bottom  boards;  match  boxes;  core  boxes;  etc. 

38  Fixed  Plant  Charges: 

To  include  a  proportion  of  such  costs  as  power,  heat 
and  light;  insurance;  taxes;  depreciation;  salary  of  super- 
intendent, general  foreman  and  miscellaneous  yard  labor; 
medical  and  hospital;  and  such  other  costs  of  a  general 
nature  that  are  more  or  less  fixed  and  that  cannot  be 
charged  directly  to  any  one  department. 

See  definitions  of  the  above  accounts  for  methods  of 
distributing  them  departmentally. 

39  Special  Pattern  and  Flask  Expense: 

To  include  the  cost  of  all  labor  and  materials  used 
in  making  and  repairing  patterns,  flasks,  jackets,  bottom 
boards,  match  boxes,  core  boxes,  rigging  up  molding  ma- 
chines, etc.,  that  is  of  a  special  nature,  and  is  traceable, 
without  pro-rating,  to  a  pattern  number. 

COREMAKING  DEPARTMENT 

41  Direct  Labor: 

To  include  all  labor  of  coremakers  and  helpers  in 
making  and  assembling  cores,  and  in  operating  core  ma- 
chines, that  is  traceable,  without  pro-rating,  to  a  pattern 
number. 

42  Indirect  Labor: 

To  include  all  coreroom  labor  other  than  that  of  ac- 
tually making  cores — sand  mixers;  sand  wheelers;  oven 
tenders ;  inspectors ;  delivering  cores  to  the  foundry ;  clean- 
ing up  department,  etc. 


164  FOUNDRY  COST  ACCOUNTING 

43    Fuel  : 

To  include  the  cost  of  all  core  fuel,  freight  and  labor 
in  unloading. 

45  Supplies  and  Tools: 

To  include  the  cost  of  all  supplies  and  tools  used  in  the 
coreroom — core  sand;  core  binders;  wire;  nails;  tools;  etc. 

46  Repair  Labor: 

To  include  the  cost  of  all  labor  in  connection  with 
the  up-keep  and  maintenance  of  the  coreroom  equipment — 
ovens;  racks;  trays;  etc. 

47  Repair  Materials: 

To  include  the  cost  of  all  materials  used  in  connection 
with  the  up-keep  and  maintenance  of  the  coreroom  equip- 
ment— ovens;  racks;  trays;  etc. 

48  Fixed  Plant  Charges: 

To  include  a  proportion  of  such  costs  as  power,  heat 
and  light;  insurance;  taxes;  depreciation;  superintendent, 
general  foreman  and  misc.  yard  labor;  medical  and  hospi- 
tal; and  such  other  costs  of  a  general  nature  that  are 
more  or  less  fixed  and  that  cannot  be  charged  directly 
to  any  one   department. 

See  definitions  of  the  above  accounts  for  methods  of 
distributing  them  departmentally. 

CLEANING  AND  TRIMMING  DEPARTMENT 

52    Indirect  Labor: 

To  include  all  labor  in  the  cleaning  and  trimming 
department — loading  and  unloading  mills;  operating  sand- 
blast barrels,  tables  and  hose;  trimming;  inspecting;  sort- 
ing; cleaning  up  department;  foreman;  etc. 

55    Supplies  and  Tools: 

To  include  the  cost  of  all  supplies  and  small  tools  used 
in  the  cleaning  and  trimming  department — sand-blast  sand; 
hose;  stars;  jacks;  small  tools;  etc. 


CLASSIFICATION  OF  ACCOUNTS  165 

56  Repair  Labor: 

To  include  the  cost  of  all  labor  in  connection  with 
the  up-keep  and  maintenance  of  all  cleaning  and  trimming 
equipment — repairs  to  mills,  sand-blast  apparatus,  dust 
arresters,   etc. 

57  Repair  Materials: 

To  include  the  cost  of  all  materials  used  in  connection 
with  the  up-keep  and  maintenance  of  the  cleaning  and 
trimming  room  equipment — repairs  to  mills,  sand-blast 
apparatus,    dust   arresters,    etc. 

58  Fixed  Plant  Charges: 

To  include  a  proportion  of  such  costs  as  power,  heat 
and  light;  insurance;  taxes;  depreciation;  salary  of  super- 
intendent, general  foreman,  and  miscellaneous  yard  labor; 
medical  and  hospital;  and  such  other  costs  of  a  general 
nature  that  are  more  or  less  fixed  and  that  cannot  be 
charged  directly  to  any  one  department. 

See  definitions  of  the  above  accounts  for  methods  of 
distributing  them  departmentally. 

ANNEALING  DEPARTMENT 

62  Indirect  Labor: 

To  include  the  cost  of  all  labor  in  the  annealing  de- 
partment— packing;  filling  and  emptying  ovens;  delivering 
to  the  finishing  and  shipping  department;  cleaning  up 
department;  cranemen;  foremen;  etc. 

63  Fuel  : 

To  include  the  cost  of  all  annealing  fuel,  freight,  and 
labor  in  unloading. 

65    Supplies  and  Tools: 

To  include  the  cost  of  all  supplies  and  small  tools  used 
in  the  annealing  department — packing  materials;  depart- 
ment and  oven  tools;  etc. 


166  FOUNDRY   COST  ACCOUNTING 

66  Repair    Labor  : 

To  include  the  cost  of  all  labor  in  connection  with 
the  up-keep  and  maintenance  of  the  annealing  ovens  and 
their  equipment,  including  cranes,  oven  trucks,  etc. 

67  Repair   Materials: 

To  include  the  cost  of  all  materials  used  in  connection 
with  the  up-keep  and  maintenance  of  the  annealing  ovens 
and   their   equipment,    including   cranes,   oven   trucks,    etc. 

68  Fixed   Plant   Charges: 

To  include  a  proportion  of  such  costs  as  power,  heat 
and  light ;  insurance ;  taxes ;  depreciation ;  salary  of  super- 
intendent, general  foreman,  and  miscellaneous  yard  labor ; 
medical  and  hospital;  and  such  other  costs  of  a  general 
nature  that  are  more  or  less  fixed  and  that  cannot  be 
charged  directly  to  any  one  department. 

See  definitions  of  the  above  accounts  for  methods  of 
distributing  them  departmentally. 

FINISHING  AND  SHIPPING  DEPARTMENT 

71  Direct  Finishing  Labor: 

To  include  all  direct  labor  in  the  finishing  department 
that  is  traceable,  without  pro-rating,  to  a  pattern  number, 
such  as  grinding,  punching,  drilling,  reaming,  scaling,  etc. 

72  Indirect  Finishing  and  Shipping  Labor: 

To  include  all  indirect  labor  in  the  finishing  and  ship- 
ping department — sorting;  trucking;  inspection;  foreman; 
etc. 

75     Supplies  and  Tools: 

To  include  the  cost  of  all  supplies  and  small  tools 
used  in  the  finishing  and  shipping  department — emery 
wheels;  press  supplies;  tapping  and  threading  machine 
supplies;  chisels  and  hammers,  oil  and  waste;  sacks;  twine; 
needles ;   etc. 


CLASSIFICATION   OF  ACCOUNTS  167 

76  Repair   Labor  : 

To  include  the  cost  of  all  labor  in  connection  with 
the  up-keep  and  maintenance  of  the  finishing  and  shipping 
room  equipment. 

77  Repair  Materials: 

To  include  the  cost  of  all  materials  used  in  connection 
with  the  up-keep  and  maintenance  of  the  finishing  and 
shipping  room  equipment. 

78  Fixed  Plant  Charges: 

To  include  a  proportion  of  such  costs  as  power,  heat 
and  light ;  insurance ;  taxes  ;  depreciation ;  salary  of  superin- 
tendent, general  foreman,  and  miscellaneous  yard  labor; 
medical  and  hospital ;  and  such  other  costs  of  a  general 
nature  that  are  more  or  less  fixed  and  that  cannot  be 
charged  directly  to  any  one  depeartment. 

See  definitions  of  the  above  accounts  for  methods  of 
distributing  them  departmentally. 

GENERAL  EXPENSE 

80-1     Office  Salaries: 

To  include  the  salaries  of  clerks  and  of  all  general 
officers. 

80-2    Office  Expense: 

To  include  all  expense  incidental  to  the  office,  other 
than  selling. 

80-3     Selling  Expense: 

To  include  the  salaries  and  expenses  of  salesmen, 
and  all  expenses  incidental  to  selling,  such  as  advertising, 
collection,  commissions,  etc. 

80-4    Misc.  General  Expense: 

To  include  all  forms  of  miscellaneous  expense  of  a 
general  nature  that  cannot  be  included  elsewhere,  such  as 


168  FOUNDRY  COST  ACCOUNTING 

membership  dues,  donations,  etc.     Charges  to  this  account 
should  be  made  sparingly. 

RETURNS  AND  ALLOWANCES 
90    Returns  and  Allowances: 

To  include  a  charge  of  an  amount  per  ton  of  castings 
produced  sufficient  to  cover  the  invoice  price  of  castings 
returned  by  customers,  less  the  scrap  value  thereof. 

Credit  an  account  "Reserve  for  Returns  and  Allow- 
ances." As  castings  are  returned  charge  the  reserve  ac- 
count and  credit  the  customer,  making  a  memorandum 
entry  on  job  cost  card. 

PATTERN  SHOP 

101  Direct  Labor: 

To  include  all  labor  in  making  and  repairing  patterns, 
core  boxes,  match  boxes,  etc.,  that  is  traceable,  without  pro- 
rating, to  a  pattern  number.  The  balance  of  this  account 
should  be  absorbed  at  end  of  month  either  through  transfer 
to  account  No.  39  or  by  direct  charges  to  customers' 
accounts. 

102  Indirect  Labor: 

To  include  all  pattern  shop  labor  that  is  not  practicable 
to  trace  to  a  pattern  number. 

105     Materials,  Supplies  and  Tools: 

To  include  the  cost  of  all  materials,  supplies  and  small 
tools  used  in  making  and  repairing  patterns,  core  boxes, 
match  boxes,  etc.  The  greater  part  of  the  balance  of  this 
account  should  be  absorbed  at  the  end  of  the  month  either 
through  transfer  to  account  No.  39  or  by  direct  charges 
to   customers'   accounts. 

108    Fixed  Charges: 

To  include  such  costs  as  power,  heat  and  light,  insur- 
ance, taxes  and  depreciation,  and  other  costs  of  a  similar 
nature  that  are  more  or  less  fixed. 


CLASSIFICATION   OF  ACCOUNTS  169 

CARPENTER  SHOP 

111  Direct  Labor: 

To  include  all  labor  in  making  and  repairing  flasks, 
jackets,  bottom  boards,  etc.,  that  is  traceable,  without  pro- 
rating, to  a  pattern  number.  The  balance  of  this  account 
should  be  absorbed  at  the  end  of  the  month  either  through 
transfer  to  account  No.  39  or  by  direct  charges  to  cus- 
tomers' accounts. 

112  Indirect  Labor: 

To  include  all  carpenter  shop  labor  that  is  not  prac- 
ticable to  trace  to  a  pattern  number. 

115     Materials,  Supplies  and  Tools: 

To  include  the  cost  of  all  materials,  supplies  and  small 
tools  used  in  making  and  repairing  flasks,  jackets,  bottom 
boards,  etc.  The  greater  part  of  the  balance  of  this  ac- 
count should  be  absorbed  at  the  end  of  the  month  either 
through  transfer  to  account  No.  39  or  by  direct  charges 
to  customers'  accounts. 

118    Fixed  Charges: 

To  include  such  costs  as  power,  heat  and  light,  insur- 
ance, taxes,  and  depreciation  and  other  costs  of  a  similar 
nature  that  are  more  or  less  fixed. 

BLACKSMITH   SHOP 

122  Indirect  Labor: 

To  include  all  blacksmith  shop  labor — making  and 
repairing  pokers,  grate  bars,  etc. 

123  Fuel: 

To  include  the  cost  of  all  blacksmith  fuel,  including 
freight  and  labor  in  unloading. 

125     Materials,  Supplies  and  Tools: 

To  include  the  cost  of  all  materials,  supplies  and  small 
tools  used  in  the  blacksmith  shop. 


170  FOUNDRY  COST  ACCOUNTING 

128    Fixed  Charges: 

To  include  such  costs  as  power,  heat  and  light,  insur- 
ance, taxes  and  depreciation,  and  other  costs  of  a  similar 
nature  that  are  more  or  less  fixed. 

FIXED  CHARGES 

138    Power,  Heat  and  Light: 

To  include  the  cost  of  all  purchased  current;  all  costs 
of  labor,  materials,  supplies  and  expense  in  producing 
power;  labor  and  materials  in  repairing  boiler  and  engine 
room  equipment,  including  air  compressors,  accumulators, 
pumps.,  generators,  transformers,  etc.,  located  in  engine 
room;  boiler  insurance,  etc. 

Distribute  the  balance  of  the  account  at  the  end  of 
each  month  to  the  several  operating  departments  in  accord- 
ance with  the  measured  or  approximated  consumption  of 
power. 

148    Fire  Insurance: 

To  include  all  payments  for  fire  insurance  and  all  costs 
of  fire  protection. 

Charge  the  account  monthly  and  credit  "Prepaid  In- 
surance" account,  the  entry  being  one-twelfth  of  the  annual 
expense. 

Distribute  the  balance  of  the  account  at  the  end  of 
each  month  to  the  several  operating  departments  on  the 
basis  of  the  approximate  book  value  of  the  department 
investment. 

158    Taxes: 

To  include  all  tax  payments  and  assessments  on  both 
real  and  personal  property. 

Charge  the  account  monthly  and  credit  "Accrued 
Taxes"  account,  the  entry  being  one-twelfth  of  the  annual 
expense. 


CLASSIFICATION   OF  ACCOUNTS  171 

Distribute  the  balance  of  the  account  at  the  end  of  each 
month  to  the  several  operating  departments  on  the  basis  of 
the  approximate  book  value  of  the  department  investment. 

168    Depreciation  : 

To  include  charges  to  cover  the  deterioration  in  the 
value  of  the  buildings  and  equipment  due  to  wear  and 
tear  and  obsolescence. 

Charge  the  account  monthly  and  credit  "Plant  Depre- 
ciation Reserve"  accounts,  the  basis  being  one-twelfth  of 
the  annual  expense. 

Distribute  the  balance  of  the  account  at  the  end  of 
each  month  to  the  several  operating  departments  on  the 
basis  of  the  approximate  book  value  of  the  department  in- 
vestment. 

178    Medical  and  Hospital: 

To  include  all  forms  of  medical  and  hospital  expense; 
personal  injury  payments  when  not  covered  by  liability 
insurance,  and  legal  expenses  in  connection  therewith,  etc. 

Distribute  the  balance  of  the  account  at  the  end  of 
each  month  to  the  several  operating  departments  on  the 
basis   of   the   total    departmental   labor. 

188    Liability  Insurance: 

To  include  monthly  premiums  on  employer's  liability 
insurance  policies. 

Distribute  the  balance  of  the  account  at  the  end  of  each 
month  to  the  several  operating  departments  on  the  basis  of 
the    total    departmental    labor. 

198     Superintendent,   General  Foreman  and  Misc.   Yard 
Labor : 
To  include  the  salary  of  the   superintendent,   general 
foreman  and  all  miscellaneous  yard  labor. 

Distribute  the  balance  of  the  account  at  the  end  of  each 
month  to  the  several  operating  departments  on  the  basis 
of  the  total  departmental  labor. 


172  FOUNDRY  COST  ACCOUNTING 

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CLASSIFICATION   OF  ACCOUNTS  185 

Distribution  of  Fixed  Plant  Charges 

In  a  foundry,  as  in  all  other  businesses,  there  are  certain 
plant  charges  or  expenses  of  a  more  or  less  fixed  nature 
that  are  not  applicable  in  whole  to  any  one  department  but 
which  are  common  to  all  departments.  Such  charges,  there- 
fore, have  to  be  or  should  be  distributed  over  the  several 
operating  departments  according  to  the  extent  each  depart- 
ment incurred  or  shared  in  such  expense.  The  expenses 
referred  to  under  this  head  are  those  commonly  known  as 
fixed  plant  charges  and  consist  of  Power,  Heat  and  Light, 
Depreciation,  Taxes,  Insurance,  Medical  and  Hospital,  Lia- 
bility Insurance,  Superintendent,  General  Foreman,  Misc. 
Yard  Labor,  etc. 

Power,  Heat  and  Light 

The  costs  of  Power,  Heat  and  Light  should  be  distributed 
over  the  several  operating  departments  in  accordance  with 
the  consumption  of  power  by  each. 

If  department  meters  are  in  use  the  accurate  consump- 
tion of  power  by  departments  is  known,  and  it  is  a  simple 
task  to  distribute  the  power  cost  in  proportion  to  the  con- 
sumption. 

If  department  meters  are  not  in  use  the  consumption  of 
power  in  each  department  can  be  obtained  approximately  by 
ascertaining  the  average  horse  power  hours  of  the  department 
motors.  That  is  to  say,  if  in  a  given  department  there  are  two 
20-horse  power  motors  estimated  to  run  on  an  average  at 
three-fourths  capacity  for  8  hours  per  day,  the  horse  power 
hours  per  day  would  be  240.  The  power  cost  is  thus  distrib- 
uted over  the  several  operating  departments  on  the  basis 
of    the    departmental    horse    power    hours. 

An  accurate  distribution  of  heat  and  light  is  a  little  more 
difficult.  This  cost,  however,  is  not  great  and  the  difference 
in  results  between  using  a  method  which  is  scientifically  cor- 
rect   and    one    approximately    so    is    not    sufficient    to    justify 


186  FOUNDRY  COST  ACCOUNTING 

spending  much  time  on  determining  an  exact  basis  of  distri- 
bution. With  a  knowledge  of  actual  conditions  a  distribution 
which  will  give  fairly  accurate  results  can  usually  be  made 
in  a  very  arbitrary  manner.  Heat,  ordinarily,  can  be  distrib- 
uted roughly  on  a  floor  space  basis  and  light  on  a  consumption 
basis  as  determined  by  the  watts  of  the  lights  in  use. 

A  distribution  of  the  monthly  charges  for  Power,  Heat 
and  Light  can  be  readily  made  in  the  manner  shown  on  page 
190.  The  percentages  determined  at  the  beginning  of  the  year, 
based  on  consumption,  can  be  used  throughout  the  year  or  until 
such  time  as  a  charge  in  operating  conditions  takes  place. 

Depreciation,  Taxes  and  Insurance 

As  depreciation,  taxes  and  insurance  on  the  foundry 
buildings  are  distributed  departmentally  on  the  same  basis, 
namely,  floor  space  occupied,  all  three  items  of  cost  can  be 
apportioned  by  using  the  same  deepartmental  factor.  The 
factor  is  the  proportion  of  floor  space  that  a  given  department 
occupies  of   the  total. 

Depreciation  on  the  foundry  equipment,  however,  bears 
no  relation  to  floor  space  and  a  lump  sum  provision  should 
not  be  distributed  oh  a  floor  space  basis.  This  method, 
which  is  followed  by  some,  is  neither  sound  in  principle  nor 
does  it  give  reasonably  accurate  results.  Equipment  depre- 
ciation should  be  computed  departmentally  on  the  basis  of 
value  and  probable  life  of  each  kind  and  type  of   equipment. 

At  the  beginning  of  each  year  an  apportionment  by  de- 
partments of  the  estimated  depreciation,  taxes  and  insurance 
on  foundry  buildings  for  the  ensuing  year  should  be  made. 
If  to  this  total  is  added  the  depreciation  on  the  equipment 
the  monthly  department  charges  for  the  entire  amount  of 
depreciation,  taxes  and  insurance  can  be  obtained  in  one  sum. 
The  apportionment  and  summary  of  these  charges  can  be 
made  very  readily  in  the  form  shown  on  page  192.  Information 
compiled  in  this  form,  apart  from  its  value  as  a  departmental 
distribution,    will    be    found   to   be    of    special   value    for   pur- 


CLASSIFICATION   OF  ACCOUNTS  187 

poses  of  ready  reference  in  all  matters  arising  with  respect  to 
past   charges    for   depreciation,   taxes   and   insurance. 

Medical  and  Hospital,  Liability  Insurance,  Superintendent, 
General  Foreman,  Misc.  Yard  Labor,  and  Misc.  Plant 
Expense 

Expenses  such  as  medical  and  hospital,  liability  insur- 
ance, superintendent,  general  foreman,  miscellaneous  yard 
labor  and  miscellaneous  plant  expenses,  which  to  a  large 
extent  are  of  a  fixed  nature  and  not  chargeable  to  any  one 
department,  and  which  bear  a  close  relation  to  the  direct 
departmental  labor  or  the  pay  roll  of  the  several  departments, 
can  be  distributed  to  an  advantage  in  a  lump  sum,  the  basis 
being  the  total  department  labor  cost.  The  basis  found  to 
exist  during  the  first  month  of  the  calendar  or  fiscal  year 
ordinarily  can  be  used  throughout  the  entire  year  with  fairly 
accurate  results. 

All  fixed  charges  which  are  distributable  on  a  labor  basis 
can  be  apportioned  in  one  lump  sum  in  the  manner  shown  on 
page  191. 

Recapitulation  of  Monthly  Fixed  Plant  Charges 

The  minimum  amount  of  clerical  labor  and  the  maximum 
amount  of  accurate  cost  data  result  from  summarizing  by 
departments  the  costs  of  power,  heat  and  light,  depreciation, 
taxes  and  insurance  and  other  charges  of  a  similar  nature. 
In  the  tabular  statement  shown  on  page  194  these  charges 
are  summarized  using  for  illustration  the  figures  shown  in  the 
preceding  forms. 

Monthly  Journal  Entries  to  Distribute  Fixed  Plant  Charges 

Departmentally 

When  a  recapitulation  is  made  of  the  fixed  plant  charges 
in  the  form  shown  above  but  one  monthly  journal  entry 
is  needed  to  close  the  accounts  on  the  ledger  and  to  distribute 
the  amounts  to  the  proper  operating  cost  accounts  of  the 
several  departments. 


188  FOUNDRY  COST  ACCOUNTING 

The  following  entry  closes  the  fixed  plant  charges  ac- 
counts and  distributes  the  costs  to  the  several  operating  depart- 
ments :  

Account  28 $1,384.00 

38 3,648.00 

48 743.00 

58 609.00 

68 317.00 

78 1,962.00 

88 609.00 

98 778.00 

To  Account  158 $   600.00 

168 400.00 

178 800.00 

188 5,250.00 

198 900.00 

218 1,500.00 

228 600.00 

The  account  numbers  conform  to  those  of  the  classifi- 
cation of  accounts  shown  on  page  140. 

Interest  on   Investment 

If  it  is  desired  to  treat  interest  on  investment  as  an  item 
of  cost  the  amount  should  be  considered  a  fixed  charge  and 
handled  similarly  to  other  fixed  charges  enumerated  in  this 
chapter. 

To  provide  in  the  accounts  for  interest  on  investment 
the  form  illustrated  on  page  192  can  carry  a  column  to  dis- 
tribute interest  on  the  investment  in  the  foundry  buildings  on 
the  floor  space  basis,  and  interest  on  the  investment  in  found- 
ry equipment  on  the  basis  of  the  value  of  the  equipment. 

The  question  of  whether  interest  on  capital  invested  is  a 
proper  charge  against  cost  of  production  is  one  on  which 
there   is    a   marked    difference   of   opinion. 

In  the  foundry  industry,  very  little,  if  anything,  is  gained 
from  a  cost  accounting  standpoint  by  charging  interest  on 
investment.  The  cases  where  it  seems  desirable  to  include 
interest  in  cost  may  be  grouped  under  two  heads: 

1.  Where  materials  have  to  be  stored  for  long  periods 
while  a  seasoning  process  is  being  completed. 


CLASSIFICATION  OF  ACCOUNTS  189 

As  seasoned  material  has  a  higher  value  than  when  first 
purchased,  it  is  apparent  that  the  interest  on  the  capital  locked 
up  during  the  seasoning,  forms  in  a  sense  a  direct  part  of 
the  cost  of  the  material.  If  the  material  were  purchased 
in  a  seasoned  condition,  a  higher  price  would  have  to  be 
paid,  and  this  price  would  at  least  include  interest  and  other 
carrying  charges. 

2.  Where,  as  between  different  processes  of  maufac- 
ture,  it  is  desired  to  show  the  effect  of  variations  in  the 
amount   of   capital   employed   and    the   term   of    employment.. 

As  some  manufacturing  processes  require  the  use  of  ex- 
pensive equipment,  or  take  a  longer  time  to  complete  the  prod- 
uct, both  of  which  tie  up  capital,  while  other  processes  require 
neither  the  equipment  nor  the  time,  it  is  impossible  to  get 
true  relative  costs  unless  consideration  is  given  to  interest 
on  the  capital  employed. 

Many  accountants,  however,  take  the  ground  that  interest 
is  not  an  item  of  cost  and  that  to  include  it  in  cost  results 
in  an  inflation  of  inventory  values  and  an  anticipation  of 
profits.  It  is  true  that  including  interest  in  cost  does  inflate 
the  inventory,  and  is  an  anticipation  of  profit  by  exactly  the 
amount  of  interest  charged  to  the  cost  of  the  goods  on  hand. 
In  arriving  at  inventory  values,  however,  the  approximate 
interest  which  has  been  charged  to  the  cost  of  the  goods  on 
hand  can  be  ordinarily  readily  determined. 

Where  interest  on  the  investment  is  treated  as  an  item 
of  cost  the  interest  charged  to  the  goods  on  hand  should  be 
eliminated  from  inventory  values,  and,  in  preparing  profit 
and  loss  statements  the  amount  of  the  interest  charged  to 
costs  during  the  period  should  be  returned  to  Income  under 
the    specific   caption   "Interest   on   Investment." 


190 


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CHAPTER  VIII 

MONTHLY  STATEMENTS 

Introductory 

Careful  thought  has  to  be  given  to  the  necessary  state- 
ments and  to  the  form  of  the  statements  in  which  the  cost 
results  appear,  if  the  cost  system  is  to  measure  plant  operating 
efficiency.  To  show  the  results  as  they  should  be  shown 
calls  for  comparative  detailed  cost  statements  at  the  end  of 
the  month.  Often  it  is  advisable  to  chart  the  costs,  as  then 
the  variations  can  be  seen  at  a  glance.  Many  a  manager 
and  superintendent  who  seem  to  be  unable  to  read  figures 
are  able  to  read  a  chart  and  to  get  readily  in  that  way 
the  story  that  the  figures  tell. 

The  manager  or  superintendent  should  be  able  to  put  his 
finger  on  any  variation  in  cost  and  to  either  know  the  cause 
or  to  be  able  to  investigate  and  discover  it.  This  can  be 
done  largely  through  the  intelligent  use  of  properly  designed 
statements  of  labor  costs,  material  costs,  and  expense  items. 

In  the  foundry  industry,  where  the  product  is  varied  and 
complicated,  manufacturing  errors  are  bound  to  occur,  but  very 
often  the  errors  can  be  easily  detected  through  detailed 
comparisons  of  monthly  cost  exhibits. 

The  comparison,  however,  should  be  prompt  enough  to 
avoid  the  repetition  of  the  same  mistakes  the  following 
month  or  period.  It  is  not  necessary  to  wait  until  the  end 
of  the  month  for  a  lot  of  vital  cost  information  such  as  direct 
labor  cost  comparisons,  comparative  earnings  of  employes, 
production  per  moftfer  per  day,  percentages  of  good  and 
bad  wtfrk,  etc, 

195 


196 


FOUNDRY  COST  ACCOUNTING 


MONTHLY  STATEMENT  OF  LABOR  COSTS 

PRODUCTION: 

Current  Month 740  Tons. 

Same  month  last  year 680  Tons. 

Labor  Cost  Per  Ton  of 

Good  Castings 

Produced 

Current 
Month 

Same 

Month 

Last  Year 

MELTING: 

Indirect  Labor 

2 

44 

28 

2 

12 
19 

Repair  Labor 

Total 

2 

72 

2 

31 

13 
20 

28 

MOLDING: 

Direct  Labor 

16 
12 

37 
04 
26 

14 
10 

Indirect  Labor 

Repair  Labor 

Total 

28 

67 

24 

61 

COREMAKING: 

Direct  Labor 

2 

1 

60 
58 
08 

2 
1 

15 
40 
10 

Indirect  Labor 

Repair  Labor 

Total 

4 

26 

3 

65 

HARD  IRON  CLEANING: 

Indirect  Labor 

1 

47 
22 

1 

20 
18 

Repair  Labor 

Total 

1 

69 

1 

38 

TRIMMING  and  INSPECTING: 

Indirect  Labor 

2 

40 
05 

2 

20 

03 

Repair  Labor 

Total 

2 

45 

2 

23 

ANNEALING: 

Indirect  Labor 

4 

98 
22 

4 

60 
18 

Repair  Labor 

Total 

5 

20 

4 

78 

MONTHLY  STATEMENTS 


197 


MONTHLY  STATEMENT  OF  LABOR  COSTS— Continued 


SOFT  IRON  CLEANING: 

Indirect  Labor 

Repair  Labor 

Total 

FINISHING  and  SHIPPING: 

Direct  Finishing  Labor 

Indirect  Finishing  and  Shipping  Labor.  .  .  . 
Repair  Labor 

Total 

Pattern  Shop  Direct  Labor 

Pattern  Shop  Indirect  Labor 

Carpenter  Shop  Direct  Labor 

Carpenter  Shop  Indirect  Labor 

Blacksmith  Shop  Labor 

Power  Plant  Labor 

Superintendent  and  General  Foreman 

Misc.  Yard  Labor 

Total  Labor  Cost 

Average  Production  Per  Molder  Per  Day  (lbs.) 
Average  Weight  of  Castings  Per  Piece  (lbs.). . . 

Average  Earnings  of  Common  Laborers 

Per  Hour  (cents) . . 

Average  Earnings  of  Molders  Per  Hour  (cents) 
Average  Earnings  of  all  Plant  Employees 

Per  Hour  (cents) 


Labor  Cost  Per  Ton  of 

Good  Castings 

Produced 


Current 
Month 


49 


4.-> 


Same 

Month 

Last  Year 


59  49 


53  69 


670 
1.65 


.37 

.60 

.42 


610 
1.70 


.30 
.54 

39 


198 


FOUNDRY  COST  ACCOUNTING 


MONTHLY  STATEMENT  OF  TOTAL  COSTS 

Month 19 . 


Good  Hard  Iron  Castings  Produced  510  Tons. 
Good  Finished  Castings  Produced  500  Tons. 
Shipped  480  Tons. 


Metal  Charged  920  Tons 
Molten  Metal  830  Tons 
Melting  Loss         90  Tons 


Cost  for  the  Month 


Amount 


Per  ton  good 
finished  cast- 
ings produced 


METAL: 

Pig  Iron 

Steel  Scrap 

Malleable  Scrap. 


Total . 


MELTING: 

Indirect  Labor 

Fuel 

Supplies  and  Tools 

Repair  Labor  and  Materials . 

Fixed  Plant  Charges 

Laboratory  Expenses 


Total, 


MOLDING: 

Direct  Labor  (Molding  Hrs.  13,225). 

Indirect  Labor 

Supplies  and  Tools 

Repair  Labor  and  Materials 

Fixed  Plant  Charges 

Special  Pattern  and  Flask  Exp 


Total . 


COREMAKING: 

Direct  Labor 

Indirect  Labor 

Fuel.. 

Supplies  and  Tools 

Repair  Labor  and  Materials 
Fixed  Plant  Charges 


Total. 


HARD  IRON  CLEANING: 

Indirect  Labor 

Supplies  and  Tools 

Repair  Labor  and  Materials 
Fixed  Plant  Charges 


Total 


TRIMMING  AND  INSPECTING: 

Indirect  Labor 

Supplies  and  Tools 

Fixed  Plant  Charges 


Total . 


$16,600.00 


$    33.20 


1,810.00 


18,410.00 


1,270.00 

1,720.00 

90.00 

450.00 

545.00 

160.00 


4,235.00 


7,890.00 
4,600.00 
180.00 
450.00 
930.00 
480.00 


14,530.00 


2,355.00 

1,530.00 

195.00 

125.00 

45.00 

225.00 


4,475.00 


980.00 
20.00 
55.00 

125.00 


1,180.00 


1,200.00 
55.00 
50.00 


1,305.00 


3.62 


36.82 


2.54 

3.44 

.18 

.90 

1.09 

.32 


8.47 


15.78 

9.20 

.36 

.90 

1.86 

.96 


29.06 


4.71 
3.06 
.39 
.25 
.09 
.45 


8.95 


1.96 
.04 
.11 
.25 


2.36 


2.40 
.11 
.10 


2.61 


MONTHLY  STATEMENTS 


199 


MONTHLY  STATEMENT  OF  TOTAL  COSTS— Continued 


ANNEALING: 

Indirect  Labor 

Fuel.. 

Supplies  and  Tools  ..." 

Repair  Labor  and  Materials 

Fixed  Plant  Charges 

Pots  and  Bottoms 


Total 


SOFT  IRON  CLEANING: 

Indirect  Labor 

Supplies  and  Tools 

Repair  Labor  and  Materials  , 
Fixed  Plant  Charges 


Total 


FINISHING  AND  SHIPPING: 

Direct  Finishing  Labor 

Indirect  Finishing  and  Shipping  Labor. 

Supplies  and  Tools 

Repair  Labor  and  Materials 

Fixed  Plant  Charges 


Total 


GENERAL  EXPENSE: 

Office  Salaries   and  Expense 

Selling  Expense 

Misc.  General  Expense 


Total , 


RETURNS  AND  ALLOWANCES: 
Returns  and  Allowances 


Total  Cost  of  Good  Finished  Castings 
Produced 


2,460.00 

1,010.00 

70.00 

410.00 

550.00 

750.00 


5,250.00 


965.00 
15.00 
50.00 

130.00 


1,160.00 


3,105.00 
1,250.00 

165.00 
55.00 

105.00 


4,680.00 


3,625.00 
240.00 
195.00 


4,060.00 


1,000.00 


60,285.00 


4.92 
2.02 
.14 
.82 
1.10 
1.50 


10.50 


1.93 
.03 
.10 
.26 


2.32 


6.21 

2.50 

.33 

.11 

.21 


9.36 


7.25 
.48 
.39 


8.12 


2.00 


120.57 


Metal  Cost  per  100  lbs.  Good  Finished  Castings  Produced $     1 .841 

Melting  Cost  per  100  lbs.  of  Molten  Metal $     0. 255 

Molding  Indirect  Costs,  Trimming  and  Inspecting  Costs,  Finishing  and 

Shipping  Indirect  Costs  and  General  Expense  to  Molding  Direct  Labor  166 . 0% 

Coremaking  Indirect  Costs  to  Coremaking  Direct  Labor 90.0% 

Hard  Iron  Cleaning,  Annealing,  Soft  Iron  Cleaning,  and  Provision  foi  Re- 
turns and  Allowances  per  100  lbs.  Good  Finished  Castings  Produced     $0,859 


Tons    Per  ton 


Value 


Inventory  of  Castings  at  Beginning  of  Month 190    $90.00     $17,100.00 

Cost  of  Good  Finished  Castings  Produced,  as  above     500     120.57        60,285.00 


Total 690       

Less  Inventory  of  Castings  at  End  of  Month 210      90.00 


77,385. CO 
18,900.00 


Cost  of  Castings  Shipped  During  Month 480    121 .85     $58,485. 00 


200 


FOUNDRY  COST  ACCOUNTING 


Comparative  Statement  of  Total  Costs 

Jan. 

Feb. 

Mar.  <  S  Oct. 

Nov. 

Dec. 

Avg. 

Tons  Good  Hard  Iron  Castings 

Produced 
Tons  Good  Finished  Castings 

Produced 
Tons  Shipped 
Tons  Metal  Charged 
Tons  Molten  Metal 
Tons  Melting  Loss 

METAL: 

Pig  Iron 

Steel  Scrap 

Malleable  Scrap 

Total 

MELTING: 

Indirect  Labor 

Fuel 

Supplies  and  Tools 

Repair  Labor  and  Materials 

Fixed  Plant  Charges 

Laboratory  Expenses 

Total 

MOLDING: 

Direct  Labor 

j 

Indirect  Labor 

Supplies  and  Tools 

Repair  Labor  and  Materials.  . 

Fixed  Plant  Charges 

Spec.  Pattern  and  Flask  Exp. 

Total 

COREMAKING: 

Direct  Labor 

j 

Indirect  Labor 

Fuel 

Supplies  and  Tools 

Repair  Labor  and  Materials. . 
Fixed  Plant  Charges 

Total 

HARD  IRON  CLEANING: 
Indirect  Labor 

Supplies  and  Tools 

Repair  Labor  and  Materials. . 
Fixed  Plant  Charges 

Total 

) 

MONTHLY  STATEMENTS 


201 


Comparative  Statement  of  Total  Costs — Continued 


TRIMMING  AND  INSPECT- 
ING: 

Indirect  Labor 

Supplies  and  Tools 

Fixed  Plant  Charges 

Total 

ANNEALING: 

Indirect  Labor 

Fuel 

Supplies  and  Tools 

Repair  Labor  and  Materials. 

Fixed  Plant  Charges 

Pots  and  Bottoms 

Total 

SOFT  IRON  CLEANING: 

Indirect  Labor 

Supplies  and  Tools 

Repair  Labor  and  Materials. 

Fixed  Plant  Charges 

Total 

FINISHING  AND  SHIPPING 

Direct  Finishing  Labor 

Indirect  Finishing  and 

Shipping  Labor 

Supplies  and  Tools 

Repair  Labor  and  Materials. 

Fixed  Plant  Charges 

Total 

GENERAL  EXPENSE: 

Office  Salaries  and  Expense.. 

Selling  Expense 

Misc.  General  Expense 

Total 

RETURNS  AND  ALLOW- 
ANCES: 
Returns  and  Allowances 

Total  Cost  of  Good  Finished 
Castings  Produced 


Metal  Cost  per  100  lbs.  Good  Finished  Castings  Produced. 

Melting  Cost  per  100  lbs.  of  Molten  Metal. 

Molding  Indirect  Costs,  Trimming  and  Inspecting  Costs,  Finishing  and  Shipping 

Indirect  Costs  and  General  Expense  to  Molding  Direct  Labor. 
Coremaking  Indirect  Costs  to  Coremaking  Direct  Labor. 
Hard  Iron  Cleaning,  Annealing,  Soft  Iron  Cleaning,  and  Provision  for  Returns 

and  Allowances  per  100  lbs.  Good  Finished  Castings  Produced. 


202 


FOUNDRY  COST  ACCOUNTING 


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MONTHLY  STATEMENTS 


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CHAPTER  IX 
PRODUCT  COSTS 


Introductory 


The  product  of  grey  iron  foundries,  of  steel  foundries, 
and  of  certain  malleable  iron  foundries  varies  to  such  an 
extent  that  it  is  practically  impossible  to  outline  in  detail  a 
method  to  determine  product  or  job  costs  that  would  apply 
to  every  foundry.  While  the  fundamental  principles  may  be 
the  same,  it  is  often  necessary  to  apply  them  differently,  de- 
pending upon  the  nature  of  the  product  and  the  class  of  the 
work  of  the  particular  foundry.  This  is  especially  true  of 
grey  iron  and  steel  foundries  that  specialize  in  particular 
classes  of  work. 

Costs,  throughout  the  foundry  industry,  divide  themselves 
into  four  classes  or  kinds,  namely,  tonnage  costs;  class  costs; 
customer's  costs  (the  cost  to  produce  the  entire  work  of 
a  given  customer)  ;  and  job  costs. 

Tonnage  Costs 

Tonnage  costs  are  averages  per  ton  to  produce  the  entire 
output  of  the  plant  for  a  stated  period.  They  are  arrived 
at  by  dividing  the  amount  of  the  several  cost  items  by  the 
output  in  tons.  The  result  is  nothing  more  than  an  average 
cost  of  all  work  for  the  month  or  period  and  for  price  mak- 
ing purposes  is  only  little  better  than  no  information.  An 
average  cost  in  the  hands  of  some  executives  is  worse  than 
no  cost  information  for  it  is  always  unsafe  to  be  guided 
by  it  in  making  quotations.  Tonnage  costs  should  always 
be   known   but   they   are   not   determined    and   should   not   be 


206 


FOUNDRY  COST  ACCOUNTING 


used    for   the   purpose    of    price    making,    the    primary    object 
for  which  class  and  job  costs   are  determined. 

Class  Costs 

Class  costs  are  a  refinement  of  tonnage  costs.  That  is 
to  say,  instead  of  determining  the  average  cost  for  the 
entire  production  of  the  foundry  the  cost  of  the  product 
divided  into  classes  is  determined.  If  the  product  is  subject 
to  classification  and  it  is  practicable  to  determine  with  a  fair 
degree  of  accuracy  the  cost  of  each  class,  the  method  of 
recording  class  costs  is  a  dependable  one  and  entails  the  least 
amount  of  clerical  labor.  However,  where  a  customer's  entire 
work,  consisting  of  different  classes,  has  been  taken  at  a 
flat  price  and  where  it  is  difficult  to  separate  work  by  classes 
it  is  not  advisable  to  attempt  to  record  class  costs. 

When  class  costs  are  kept,  the  classification  should  be 
one  of  weight,  separating  the  work  as  to  plain  and  cored  cast- 
ings. For  grey  iron  and  steel  castings,  the  following  weight 
classification  for  both  plain  and  cored  work  will  generally 
be  found  to  be  sufficient  to  reflect  difference  in  costs  due  to 
differences  in  weights: 


Class 

Castings  weighing 

A 

Over 

10,000  lbs. 

B 

Over 

5,000  to 

10,000  lbs. 

C 

Over 

2,000  to 

5,000  lbs. 

D 

Over 

1,000  to 

2,000  lbs. 

E 

Over 

500  to 

1,000  lbs. 

F 

Over 

250  to 

500  lbs. 

G 

Over 

100  to 

250  lbs. 

H 

Over 

50  to 

100  lbs. 

I 

Over 

25  to 

50  lbs. 

J 

Over 

15  to 

25  lbs. 

K 

Over 

10  to 

15  lbs. 

L 

Over 

5  to 

10  lbs. 

M 

Over 

2  to 

5  lbs. 

N 

Over 

1  to 

2  lbs. 

O 

1  lb.  and  under 

For  light  work,  that  falling  under  say  the  last  five  classes, 
a    further    classification   by   weight   per    mrJd    will    be    fbWd 


PRODUCT  COSTS 


207 


necessary  in  order  to  determine  representative  costs  of  each 
class.  For  instance,  the  cost  to  produce  a  two-pound  casting 
with  but  two  in  a  mold  is  vastly  different  from  the  cost  to 
produce  a  two-pound  casting  with  four  in  a  mold.  The  cost 
of  molding  light  work  is  very  largely  dependent  upon  the 
weight  per  mold  instead  of  the  weight  of  the  casting. 

For  malleable  iron  castings,  which  as  a  whole  are  consid- 
erably lighter  than  either  grey  iron  or  steel,  the  following 
weight  classification,  for  both  plain  and  cored  work,  is  recom- 
mended : 


Class 


m 

1 
B 

h 
m 

1 
C 

h 
m 

1 
D 

h 
m 

1 

vl 
£ 

h 
m 

1 

vl 
F 

h 
m 

1 

vl 
G 

h 
m 

1 
vl 


Castings  weighing 


Over   25    lbs.    per    casting 
Over  60   lbs.    per   mold 
Over  35  to  60  lbs.  per  mold 
Over  25  to  35  lbs.  per  mold 

Over    15   to   25   lbs.   per  casting 
Over    30    lbs.    per    mold 
Over  20  to  30  lbs.  per  mold 
Over  15  to  20  lbs.  per  mold 

Over  7  to  15  lbs.  per  casting 
Over   15  lbs.  per  mold 
Over  10  to  15  lbs.  per  mold 
Over     7  to  10  lbs.  per  mold 

Over  2  to  7  lbs.  per  casting 
Over  8  lbs.   per   mold 
Over  5  to  8  lbs.  per  mold 
Over  3  to  5  lbs.  per  mold 
Over  2  to  3  lbs.  per  mold 

Over  1  to  2  lbs.  per  casting 
Over   7  lbs.   per  mold 
Over  4  to  7  lbs.  per  mold 
Over  2  to  4  lbs.  per  mold 
Over  1  to  2  lbs.  per  mold 

Over  .5  to  1  lb.  per  casting 
Over  5  lbs.   per  mold 
Over  3  to  5  lbs.  per  mold 
OveY  1  to  3  lbs.  per  mold 
Over  .5  to  1  lb.  per  mold 

.5  lb.  or  less  per  casting 
Over  5  lbs.  per  mold 
Over  3  to  5  lbs.  per  mold 
Over  1  to  3  lbs.  per  mold 
From  0  to  1   lb.   per  mold 


The  class  characters  h,  m,  1,  and  vl  are  designations,  respective- 
ly, Of  heavy,  m'etlnxm,  light,  anu  very  light  weights  per  mold. 


208  FOUNDRY  COST  ACCOUNTING 

Customer's  Costs 

Where  all  of  the  work  of  a  customer,  consisting  of  a 
variety  of  similar  or  dissimilar  patterns,  has  been  taken  at  a 
flat  price,  which  is  often  the  case  in  both  grey  iron  and 
malleable  iron,  and  to  some  extent  in  steel  castings,  it  is  usual 
to  treat  the  customer's  entire  product  as  the  cost  unit.  If  the 
price  covers  the  whole  of  the  customer's  business  the  cost  of 
production  should  be  known  covering  the  same  quantity.  If 
different  parts  of  the  work  take  different  prices  the  cost  to 
produce  the  work  taken  at  the  different  prices  should  be  the 
cost   unit   or   cost  division. 

When  there  is  but  one  price  covering  a  number  of  pat- 
terns of  castings  the  information  as  to  the  cost  of  each  is  of 
little  value  for  cost  and  price  comparisons  but  it  is  of  vital 
value  in  spotting  the  patterns  that  are  made  at  a  loss  or  at 
an  inadequate  profit.  The  fact  that  certain  patterns  are  run 
at  a  loss,  as  some  almost  invariably  are  under  a  flat  price, 
should  be  of  particular  interest.  Even  though  the  entire 
work  of  a  customer  is  the  cost  unit,  the  system  should  be  so 
designed  to  make  it  possible  to  readily  determine  the  cost 
of    any    particular    pattern. 

Job  Costs 

In  the  foundry  industry,  owing  to  the  multitude  of  pat- 
terns produced  by  most  concerns,  a  greater  amount  of  clerical 
labor  is  required  to  ascertain  job  costs  than  is  required 
to  ascertain  either  class  costs  or  customer's  costs.  The  fact, 
however,  that  the  cost  of  no  two  patterns  is  the  same  is 
sufficient  reason  for  ascertaining  job  costs  and  for  demand- 
ing a  price  on  each  pattern  based  upon  its  true  cost.  This 
is  the  only  sound  and  logical  way  of  pricing  castings.  For 
foundries  that  produce  any  considerable  quantity  of  castings 
of  a  given  pattern  or  that  produce  difficult  heavy  castings 
it  is  most  essential  that  the  cost  of  each  pattern  be  known 
and  that  each  pattern  carry  its  own  price. 


PRODUCT  COSTS  209 

Undeniably,  a  job  cost,  or  a  cost  on  each  and  every  job, 
is  far  more  accurate,  dependable  and  scientific  than  any  other 
kind  of  cost  and  it  is  the  only  cost  for  price  making  purposes 
that  is  safe  to  recommend. 

In  ascertaining  job  costs,  a  job  cost  record  of  suitable 
size  and  design  should  be  employed  to  record  both  the  direct 
and  indirect  costs  of  each  pattern,  the  indirect  costs  or  over- 
head rates  being  computed  at  the  end  of  the  month  upon  the 
determination  of  the  exact  overhead  rates  for  the  month. 
On  long  running  jobs,  a  job  cost  summary  card  should  be 
made  out  showing  in  summary  form  the  essential  information 
from  month  to  month.  The  forms  of  the  Job  Cost  Record  on 
page  230  and  of  the  Job  Cost  Card  on  page  233  should  be 
studied  and  analyzed  carefully  as  they  comprise  the  com- 
pleted structure  of  a  cost  system. 

Flexibility  of  Cost  System 

While  the  cost  units  for  determining  class  costs,  cus- 
tomer's costs,  and  job  costs,  are  different,  a  cost  system  can 
be  and  should  be  made  sufficiently  flexible  to  readily  change 
from  one  to  another  at  any  time  without  destroying  the 
value  of  cost  information  for  analytical  and  comparative 
purposes.  The  fundamental  principles  of  accounting  under 
each  are  the  same,  the  classification  of  accounts  can  be  the 
same,  and  the  methods  of  distributing  overhead  expense 
can  be  the  same.  The  principal  difference  is  that  of  classify- 
ing. The  forms  of  Job  Cost  Record  and  Job  Cost  Card, 
referred  to  above,  can  be  used  in  recording  customer's  costs, 
class  costs,  or  job  costs. 

Direct  Charges 

All  costs  divide  themselves  into  two  parts,  namely,  direct 
costs  and  indirect  costs.  Direct  costs,  or  charges,  are  those 
that  can  be  located  as  being  incurred  on  or  for  a  particular 


210  FOUNDRY   COST  ACCOUNTING 

piece  of  work  or  job  and  where  it  is  practicable  to  charge 
the  cost  or  expense  directly  to  the  particular  work  or  job. 

The  direct  costs  that  are  common  to  all  foundries  are 
the   following: 

Metal. 

Melting. 

Molding   direct   labor. 

Special  pattern  and  flask  expense. 

Coremaking    direct    labor. 

Finishing    direct    labor. 

Metal 

The  cost  of  the  metal  used  can  be  considered  a  direct 
charge  inasmuch  as  the  metal  cost  per  pound  of  good  castings 
produced  can  be  applied  directly  to  the  production  of  each 
class  or  of  each  job.  The  cost  of  the  metal  per  pound  ot 
good  castings  is  the  same  in  all  kinds  of  work  irrespective 
of   fluctuations   in   melting  and  other   cost   items. 

A  large  number  of  foundries  make  the  mistake  of  throw- 
ing together  for  cost  purposes  the  cost  of  metal  and  of  melting. 
This  is  a  bad  practice  both  for  purposes  of  determining 
operating  efficiency  and  for  the  purpose  of  determining  indi- 
vidual costs.  It  is  especially  bad  for  the  reason  that  the 
costs  of  metal  and  melting  cannot  be  equitably  distributed 
over  different  kinds  of  work  on  the  same  basis.  ,The  cost  of 
the  metal,  apart  from  melting,  in  a  pound  of  good  castings 
is  the  same  irrespective  of  the  kind  of  casting  and  irrespective 
of  whether  it  took  three  pounds  of  molten  metal  to  get  one 
pound  of  good  castings  or  whether  but  1^2  pounds  of  molten 
metal  were  required  to  get  a  pound  of  good  castings.  The 
only  exception  that  can  be  reasonably  taken  to  the  above 
statement  is  that  there  is  a  slight  additional  metal  loss  when 
scrap  and  sprue  are  remelted,  but  as  a  matter  of  practice 
practically  all  the  slag  is  eliminated  on  the  first  melt  and 
the  metal  loss  on  the  remelt  is  not  large. 


PRODUCT  COSTS  211 


Melting 


The  cost  of  melting  the  iron,  as  noted  above,  should 
always  be  separate  from  the  cost  of  the  metal  itself  as  the 
melting  cost  is-  a  variable  item  depending  upon  the  quantity 
of  the  remelt — gates,  sprue,  risers  and  bad  castings.  It  is 
contended  by  some  who  have  not  given  the  matter  much 
thought  that  the  difference  in  melting  cost  between  a  casting 
weighing  say  10  pounds  for  which  24  pounds  of  molten 
metal  had  to  be  poured  and  one  of  the  same  weight  but 
requiring  only  12  pounds  of  molten  metal  would  not  be  great, 
but  on  second  thought  it  becomes  evident  that  the  cost  is 
just  twice  as  great  for  it  costs  just  as  much  to  remelt  sprue 
and  bad  castings  as  it  does  pig  iron.  The  cost  is  even  greater 
for  the  sprue  and  bad  castings  cannot  be  handled  as  eco- 
nomically as  pig  iron.  A  casting  with  a  heavy  remelt  is 
always  an  expensive  one  to  produce  even  apart  from  the 
cost  of  melting  which  without  question  should  be  distributed 
on  the  weight  of  molten  metal  poured  and  not  on  the  weight 
of  good  castings  produced. 

Where  the  product  of  the  foundry  is  varied,  consisting 
of  various  classes  of  work,  as  is  the  case  in  nearly  all  jobbing 
foundries,  it  is  dangerous  to  disregard  the  difference  in  the 
scrap  recovered  as  between  different  classes  of  work,  so  far  as 
the  melting  cost  is  concerned,  and  use  inaccurately  an  average 
of  the  metal  and  melting  cost  per  weight  of  good  castings 
produced. 

To  illustrate: 

Example  1,  Automobile  Hub: 

120  lbs.   molten   metal   at   say    V/2c $1.80 

Cost  of  melting,  40c  cwt 48 

2.28 
Less  20  lbs.  scrap  recovered  at  lj^c 30 

Cost  of  metal  per  100  lbs.  good  castings 1.98 


212  FOUNDRY  COST  ACCOUNTING 


Example  2,  Harness  Buckle: 

800  lbs.  molten  metal  at  l^c 12.00 

Cost  of  melting,  40c  cwt 320 

15.20 
Less  700  lbs.  scrap  recovered  at  lj^c 10.50 

Cost  of  metal  per  100  lbs.  good  castings 4.70 

In  the  case  of  the  hub,  the  cost  of  the  net  metal  in  the 
good  castings  is  $1.98  per  cwt.,  and  in  the  case  of  the  buckle, 
$4.70  per  cwt.,  or  nearly  two  and  one-half  times  the  cost. 

While  the  above  two  examples  probably  illustrate  extremes, 
yet  there  are  many  jobs  that  nearly  approach  the  difference 
in  cost  shown  above.  Disregarding  the  cost  to  remelt  the 
greater  quantity  of  scrap  in  the  example  of  the  buckles,  and 
using  in  each  case  the  average  cost  of  metal  per  weight  of  good 
castings,  namely,  $3.34  per  cwt.,  might  easily  give  a  difference 
between  the  false  book  cost  and  the  true  cost  as  great  as  the 
expected  profit  added  to  the  incorrect  cost. 

In  other  words,  the  foundry  that  inaccurately  computed 
its  cost  of  buckles  might  conceivably  secure  enough  buckle 
orders  to  financially  embarrass  it  while  it  could  not  compete 
for  hub  orders  on  the  showing  of  its  misleading  cost  informa- 
tion. 

The  $3.34  average  cost  referred  to  above  is  often  inaccu- 
rately arrived  at  in  the  following  manner: 

Example  1,  Automobile  Hub: 

120   lbs.   molten   metal   at    say    VAc $1.80 

Less  20  lbs.  scrap  recovered  at  l^c 30 

Tso 

Cost    of    melting 1.84 

Cost  of  metal  per  100  lbs.  good  castings 3.34 

Example  2,  Harness  Buckle: 

800   lbs.,   molten    metal   at    V/2c 12.00 

Less  700  lbs.  scrap  recovered  at  1^4c 10.50 

1.50 
Cost   of  melting    1.84 

Cost  of  metal  per  100  lbs.  good  castings 3.34 


PRODUCT  COSTS  213 

If  the  melting  cost  is  $3.68  to  produce  920  pounds  of 
molten  metal  it  is  entirely  obvious  that  the  cost  to  produce 
120  pounds  of  molten  metal  to  yield  100  pounds  of  hubs  is  not 
as  great  as  the  cost  to  produce  800  pounds  of  molten  metal 
to  yield  100  pounds  of  buckles.  The  majority  of  foundries, 
nevertheless,  overlook  this  fact  and  erroneously  distribute  their 
melting  costs  on  the  basis  of  good  castings  produced. 

The  cost  of  melting  can  be  considered  a  direct  charge  inas- 
much as  the  melting  cost  divided  by  the  quantity  of  molten 
metal  poured  will  give  a  cost  per  pound  of  molten  metal  which 
can  be  applied  directly  to  the  pounds  of  metal  poured  for  each 
job.  The  aggregate  pounds  of  metal  poured  for  each  job  is 
ascertained  by  multiplying  the  number  of  molds  made  by  the 
average  weight  of  metal  per  mold,  i.  e.,  castings,  gate  and 
sprue. 

When  a  pattern  is  first  put  in  the  sand  weight  say  a  half 
dozen  molds  before  breaking  off  the  castings  in  order  to  get  an 
average  weight.  While  the  variation  in  weight  will  be  but 
slight,  an  average  will  be  found  more  dependable  than  the 
weight  of  a  single  mold.  After  the  weight  is  obtained  it 
becomes  a  matter  of  record  and  there  is  no  need  of  even  making 
a  weight  test  until  a  change  has  been  made  in  the  pattern  or 
in  the  gating  at  which  time  a  new  weight  of  the  mold  should 
be  secured. 

At  first  thought,  to  obtain  gross  weights,  may  seem  like 
red  tape,  but  if  accurate  and  dependable  costs  are  to  be  secured 
the  difference  in  melting  cost  is  a  point  that  must  be  taken  into 
consideration.  The  only  foundries  that  will  experience  any 
difficulty  in  distributing  the  melting  costs  as  they  should  be  will 
be  the  small  foundries  that  run  on  short  orders  or  use  "hatch 
gates,"  i.  e.,  two  or  more  different  patterns  in  a  mold. 

Where  there  is  a  well  founded  objection  to  ascertaining 
by  actual  weight  the  gross  metal  weight  per  mold,  a  standard 
table  of  weights  for  risers,  heads,  gates,  etc.,  can  be  used  with 
fair  results. 


214  FOUNDRY   COST  ACCOUNTING 

For  checking  purposes,  the  aggregate  quantity  of  molten 
metal  poured  during  the  month  can  be  ascertained  by  adding 
to  the  production  of  good  castings  the  weight  of  gates,  sprue, 
risers  and  bad  castings  produced.  In  most  cases,  the  weight 
of  scrap  used  (own),  which  is  always  known,  can  be  taken 
as  the  weight  produced  as  it  is  ordinarily  used  up  as  fast 
as  produced. 

Molding  Direct  Labor 

The  direct  labor  costs  of  molding  can  be  readily  applied 
directly  to  class  costs,  customer's  costs  or  job  costs.  Foundries 
almost  without  exception  treat  molding  labor  as  a  direct  charge 
even  though  no  other  items  are  so  considered. 

Special  Pattern  and  Flask  Expense 

Unfortunately,  only  a  small  proportion  of  foundrymen 
consistently  charge  to  the  individual  job,  the  special  pattern  and 
flask  expense  incurred  in  connection  therewith.  All  pattern, 
flask  and  rigging  expense  of  a  special  nature,  should  in  all 
cases,  be  considered  a  direct  charge  and  applied  directly  to  the 
individual  job.  The  initial  cost  of  a  special  nature  to  rig  and 
to  run  a  job  is  a  direct  charge  to  the  job  and  should  be  borne 
by  it. 

Coremaking  Direct  Labor 

The  direct  labor  costs  of  coremaking  can  be  readily  applied 
directly  to  class  costs,  customer's  costs,  or  job  costs.  There  is 
no  particular  difficulty  in  treating  all  labor  in  making  cores  as 
a  direct  charge. 

Finishing  Direct  Labor 

All  direct  labor  costs  of  finishing,  such  as  grinding, 
straightening,  punching,  drilling,  reaming,  gauging,  etc.,  should 
be  charged  to  the  job  or  work  requiring  the  additional  opera- 


PRODUCT  COSTS  215 

tion.  It  is  manifestly  unfair  to  burden  work  not  requiring  a 
finishing  operation  with  a  share  of  such  costs,  and  to  lighten 
the  burden  of  work  requiring  a  finishing  operation  by  charging 
a  part  of  the  cost  thereof  to  work  not  requiring  finishing. 
This  is  the  result  when  all  finishing  labor  is  treated  as  an 
overhead  expense. 

It  is  practicable  in  almost  every  foundry,  no  matter  what 
the  plant  practice  is,  to  charge  the  direct  labor  spent  on  finish- 
ing operations  to  the  particular  work  or  job  receiving  the  finish- 
ing operation.  There  are  three  practical  ways  by  which  these 
costs  can  be  determined.  One  method  is  to  have  the  work- 
man report  the  pattern  number  of  the  castings  on  which  he 
worked  and  the  time  spent  thereon,  if  day  work,  or  the  number 
of  pieces,  if  piece  work.  From  these  time  reports,  the  work- 
man's pay  is  calculated  and  postings  are  made  to  the  job  cost 
record.  The  disadvantage  of  this  method  is  that  it  places 
more  clerical  work  on  the  workman  than  some  of  them  are 
entirely  willing  to  do,  particularly  where  they  are  changing 
patterns  frequently,  while  at  the  same  time  the  amount  of 
clerical  work  in  the  smaller  plants  is  not  sufficient  to  justify  the 
employment  of  a  clerk  to  do  it. 

Another  method  in  use,  although  not  one  to  be  generally 
recommended,  is  to  have  the  finishing  room  foreman  report 
to  the  office  the  pattern  numbers  of  the  castings  on  which 
finishing  work  was  performed.  The  office  then  from  the 
records  of  the  weights  of  such  castings  produced,  ascertains 
the  total  weight  of  castings  receiving  finishing  work  and  divides 
the  finishing  labor  cost  by  the  total  weight  to  ascertain  the  cost 
per  pound  or  per  100  lbs.  This  rate  is  then  applied  as  a  direct 
finishing  charge  to  such  castings  as  received  a  finishing  opera- 
tion. While  this  method  gives  better  results  than  are  obtained 
when  the  finishing  costs  are  distributed  as  an  overhead  expense 
over  all  work  irrespective  of  whether  the  work  required  finish- 
ing, yet  it  is  not  to  be  generally  recommended  for  the  reason 
that  the  weight  of  the  castings  and  the  time  required  to  finish 
them  bear  no  direct  relation. 


216  FOUNDRY  COST  ACCOUNTING 

The  most  practicable  and  accurate  method,  when  the  work- 
men are  not  on  piece  work,  is  to  have  the  finishing  foreman 
report  both  the  pattern  number  of  such  castings  as  received 
finishing  work  and  an  average  finishing  time  per  piece  deter- 
mined by  a  time  observation.  Then,  in  the  office,  a  finishing 
cost  per  piece  by  pattern  numbers  is  ascertained  and  the  rate 
applied  to  the  total  number  of  pieces  produced  of  each  pattern. 
This  latter  method  works  out  very  satisfactorily  both  as  to  accu- 
racy and  as  to  the  clerical  labor  involved. 

Indirect  Charges 

In  every  manufacturing  plant  there  are  certain  items  of 
cost  that  cannot  be  charged  directly  to  the  different  products, 
classes  of  work,  or  jobs,  for  the  reason  that  the  expense  was 
not  incurred  for  any  one  product  or  job  in  particular  but  for 
all  products  or  jobs  in  common.  This  is  true  in  all  plants  and 
in  every  industry,  for  such  items  of  cost  as  superintendence, 
supplies,  power,  heat,  light,  insurance,  taxes  and  depreciation. 
In  a  foundry,  in  addition  to  such  items  as  the  above,  there  are 
a  great  many  other  items  which  form  a  part  of  production 
costs  that  cannot  practicably  be  charged  to  individual  products 
or  jobs. 

Ordinarily,  in  most  industries,  practically  all  or  at  least  the 
greater  part  of  the  labor  costs  are  direct  charges  inasmuch  as 
the  cost  can  be  charged  directly  to  the  job  on  which  the  work- 
man was  engaged,  but  this  is  not  true  in  the  production  of  cast- 
ings. As  a  general  rule,  practically  all  labor,  other  than  that 
of  molding  and  coremaking,  is  indirect  as  it  cannot  be  charged 
to  the  product  or  job  and  therefore  has  to  be  distributed 
over  the  product  or  jobs  produced  on  a  basis  by  which  each 
product  or  job  shares  in  an  equitable  manner  that  part  of  the 
expense  that  should  be  borne  by  it.  Other  plant  expenses 
which  have  to  be  similarly  distributed  are  relatively  heavy. 

The  proportion  of  expense  in  the  foundry  industry  that  has 
to  be  treated  as  an  overhead  and  distributed  on  some  fixed 
or  variable  basis  is  considerably  larger  than  in  most  manufac- 


PRODUCT  COSTS  217 

turing  industries.  This  fact,  however,  is  no  good  argument 
for  not  determining  product  or  job  costs,  for  the  reason  that 
there  are  certain  bases  for  distributing  the  overhead  plant  ex- 
pense which  will  give  a  reasonably  accurate  cost  of  each  and 
every  product  or  job,  at  least  as  accurate  as  in  the  majority 
of  other  industries.  It  is  most  important,  however,  that  the 
bases  be  the  correct  ones,  otherwise  the  results  will  be  mis- 
leading. 

Methods  of  Distributing  Indirect  Charges 

There  are,  in  the  foundry  industry,  four  bases  by  which 
the  indirect  charges  can  be  distributed,  namely,  (1)  Molding 
direct  labor  basis;  (2)  Molding  man-hour  basis;  (3)  Molding 
machine-hour  basis,  and  (4)  Tonnage  basis. 

Molding  Direct  Labor  Basis 

This  method  of  distributing  indirect  charges  is  based  on 
the  principle  that  the  expenses  are  incurred  in  proportion  to 
the  direct  molding  labor.  The  amount  of  the  indirect  charges 
is  divided  by  the  amount  of  the  molding  labor,  which  gives 
the  percentage  the  indirect  charges  bear  to  the  direct  charges. 
This  percentage  is  then  applied  to  the  direct  labor  cost  of 
the    particular    job. 

Molding   Man-Hour   Basis 

This  method  is  based  on  the  principle  that  the  indirect 
expenses  are  incurred  in  proportion  to  the  time  spent  in 
molding.  The  amount  of  the  indirect  charges  is  divided  by 
the  total  hours  spent  in  molding,  which  gives  an  hourly 
overhead  rate.  This  rate  is  then  applied  to  the  molding 
time    of    the   particular    job. 

Molding   Machine-Hour   Basis 

This  method  is  based  on  the  principle  that  the  indirect 
expenses  are  incurred  in  proportion  to  the  number  of   hours 


218  FOUNDRY   COST  ACCOUNTING 

the  molding  machines  were  in  operation.  The  amount  of  the 
indirect  charges  is  divided  by  the  total  machine  hours  which 
gives  an  hourly  machine  overhead  rate.  This  rate  is  then 
applied  to  the  total  number  of  machine  operating  hours 
required  to  produce  the  particular  job. 

Tonnage  Basis 

This  method  is  based  on  the  principle  that  the  indirect 
expenses  are  incurred  in  proportion  to  the  weight  of  castings 
produced.  The  amount  of  the  indirect  charges  is  divided 
by  the  tonnage  produced  which  gives  a  tonnage  overhead 
rate.  This  rate  is  then  applied  to  the  weight  of  the  par- 
ticular job. 

There  are  certain  indirect  expenses  that  bear  a  more 
constant,  closer,  and  truer  relation  to  the  molding  direct 
labor  than  to  any  other  factor  or  basis  and  such  costs  should 
be  distributed  on  that  basis.  Then  again  there  are  certain 
items  of  overhead  expense  that  go  with  time  and  space 
occupied  which  should  be  distributed  on  the  molding  hour 
basis,  or,  if  air  molding  machines  are  used  extensively,  the 
machine  hour  basis  is  probably  the  best.  Then  there  are 
expenses  that  are  incurred  in  direct  proportion  to  weight 
and  which  should  be  distributed  on  the  basis  of  the  weight 
of    good   castings    produced. 

The  indirect  expense  by  departments  will  now  be 
considered  in  relation  to  the  basis  of  distribution  which  will 
give,  in  most  foundries,  the  most  accurate  and  dependable 
results. 

Molding  Department 

A  considerable  part  of  the  expense  on  the  molding 
floor  as  well  as  the  expense  incurred  in  making,  changing 
and  repairing  equipment  for  the  molders  cannot  be  prac- 
ticably charged  to  the  work  or  job  on  which  the  molder  is 
engaged.     It  is  necessary,  therefore,  to  distribute  such  expense 


PRODUCT  COSTS  219 

over  the  jobs  on  the  floor  in  a  manner  which  will  insure  that 
each  job  gets  the  share  that  should  be  borne  by  it. 

It  is  evident  to  the  practical  foundryman  that  the  expense 
incurred  on  or  for  the  molding  floor  such  as  for  sand  and  all 
miscellaneous  foundry  supplies,  indirect  labor  in  shifting,  in 
shaking  out  castings,  in  delivering  them  to  the  cleaning  depart- 
ment, in  gathering  up  sprue,  in  cutting  sand,  in  making,  chang- 
ing and  repairing  equipment,  etc.,  cannot  be  equitably  distributed 
on  a  basis  of  weight  of  castings  produced.  For  generally,  the 
molder  with  a  daily  output  of  but  250  pounds  of  light  or  rangy 
castings  will  require  practically  as  much  sand  and  just  as  many 
supplies  and  his  work  on  the  floor  may  require  as  much  time 
to  shake  out  and  gather  up  the  castings  and  sprue  as  in  the  case 
of  a  molder  with  an  output  of  750  lbs.  of  a  more  bulky  type. 
When  such  expenses  are  distributed  on  a  weight  basis,  the  basis 
often  found  in  use,  the  750  pound  output  would  be  charged  with 
three  times  as  much  molding  overhead  as  the  250  pound  output, 
whereas  the  latter  should  in  all  probability  stand  an  equal 
share  of  the  expense. 

In  the  majority  of  foundries,  the  most  equitable  and  prac- 
ticable way  by  which  the  indirect  expense  on  the  molding  floor 
can  be  distributed  is  on  the  basis  of  the  molding  direct  labor. 
The  molding  direct  labor,  usually  piece  work,  will  be  found  to 
bear  a  fairly  true  relation  to  the  indirect  expense.  The  relation 
is  by  far  a  closer  one  than  weight  and  generally  closer  than  the 
molding  hours.  The  molding  hour,  as  a  basis,  however,  in  a 
number  of  foundries  proves  a  fairly  good  one.  Ordinarily,  the 
molding  hour  is  not  as  good  a  basis  as  the  molding  direct  labor 
to  distribute  the  overhead  expense  on  the  molding  floor  for 
the  reason  that  the  greater  part  of  the  expense  bears  a  more 
direct  relation  to  what  a  molder  produces,  and  is  paid  for, 
than  to  the  time  spent  in  molding. 

The  basis,  to  a  large  degree,  depends  upon  the  molding 
equipment.  For  bench,  hand  machine,  and  floor  molding,  the 
molding  direct  labor  basis  is  almost  without  exception  the  best, 
while  for  air  driven  machine  molding  the  machine-hour  basis  is 


220  FOUNDRY  COST  ACCOUNTING 

ordinarily  the  best.  Where  there  is  both  bench  molding  and 
machine  molding,  as  there  usually  is,  it  is  a  good  practice  to 
make  two  divisions  of  the  molding  floor — a  bench  molding  divi- 
sion and  a  machine  molding  division,  recording  separately  the 
operating  costs  of  each  division.  In  the  bench  molding  divi- 
sion, the  molding  direct  labor  basis  could  be  used,  while  in 
the  machine  molding  division,  the  machine-hour  basis  could  be 
used.  In  this  way  machine  jobs  would  carry,  as  they  should, 
the  entire  burden  of  the  cost  of  power,  repairs,  depreciation  of 
machines,  and  other  expenses  incurred  only  by  the  machines. 

Coremaking  Department 

The  indirect  expense  of  the  core  department,  which  is 
usually  all  the  expense  of  the  department  other  than  labor 
spent  in  actually  making  and  assembling  cores,  is  usually  most 
equitably  distributed  on  the  basis  of  the  core-making  direct 
labor.  The  basis  of  weight  of  castings  produced  is  not  in  the 
least  a  true  one  while  the  time  spent  in  making  cores,  which 
is  not  usually  recorded,  as  most  of  the  work  is  piece  work, 
would  not  be  as  satisfactory  a  basis  as  is  the  coremaking  direct 
labor. 

The  practice  of  a  small  proportion  of  foundries  is  to  treat 
core  mixtures  as  a  direct  charge  by  determining  the  weight 
of  the  mixture  used  per  casting  and  the  cost  per  pound  of  the 
particular  mixture  used.  It  is  advisable  to  handle  the  mixture 
cost  in  this  way  when  it  can  be  done  practicably.  The  mixtures 
are  sometimes  divided  into  classes,  say  four,  with  a  unit  cost 
of  each. 

Cleaning  Department 

In  all  cases  where  the  cleaning  is  done  in  rattlers  or 
tumbling-barrels,  no  part  of  the  cost  of  cleaning  is  direct  in 
the  sense  that  it  can  be  charged  to  the  work  or  job  on  which 
the  expense  was  incurred.  It  is  necessary,  therefore,  to  pro- 
rate or  distribute  the  entire  expense  of  the  department.     The 


PRODUCT  COSTS  221 

most  equitable  basis  is  the  weight  of  castings  rattled  or  cleaned. 
A  number  of  foundries  use  the  molding  direct  labor  as  a  basis 
but  it  is  not  a  good  one  as  the  cleaning  costs  and  the  molding 
labor  bear  no  relation.  The  only  possible  relation  is  in  the  case 
of  light  work  on  which  the  molding  direct  labor  cost  bears 
some  relation  to  the  added  cost  of  handling  a  greater  number 
of  pieces  in  the  cleaning  department.  In  most  foundries,  how- 
ever, small  pieces  are  handled  differently  than  heavy  pieces 
which  substantially  equalizes  the  cleaning  cost  per  pound  of 
light  and  heavy  work.  Thus,  light  castings  are  shoveled  and 
dumped  into  the  rattlers  while  the  heavier  ones  must  be  handled 
individually  by  hand.  Furthermore,  a  tumbling  barrel  holds  ap- 
proximately an  equal  weight  of  small  or  large  castings  and 
ordinarily  there  is  no  difference  in  the  time  required  to  clean 
them.  The  weight  of  castings  tumbled,  or  the  weight  of  good 
castings  produced  is  the  most  equitable  basis  that  can  be  used 
to  distribute  the  expense  of  the  cleaning  department. 

Where  frail  or  difficult  heavy  work  is  produced,  which 
necessitates  cleaning  by  sand-blast,  the  costs,  where  it  is  prac- 
ticable, should  be  treated  as  direct  charges. 

Trimming  and  Inspecting  Department 

In  malleable  iron  foundries,  the  costs  of  the  Trimming 
and  Inspecting  department,  principally  labor,  by  right,  should 
be  a  direct  charge  as  the  costs  vary  greatly  as  between  different 
classes  of  work.  Plant  practices  and  plant  arrangement,  how- 
ever, make  it  impracticable  in  many  foundries  to  attempt  to 
charge  directly  to  the  job  or  to  the  work  of  each  customer  the 
labor  costs  of  trimming  and  inspecting.  Where  there  is  consid- 
erable variation  in  the  labor  cost  as  between  different  kinds  of 
work,  and  where  the  trimming  and  inspection  labor  is  on  a 
piece  basis,  or  on  a  tonnage  basis  with  different  rates  for 
different  classes  of  work,  it  is  usually  practicable  to  treat 
trimming  and  inspecting  costs  as  a  direct  charge  and  to  have 
the  work  or  job  reflect  the  exact  difference  in  cost. 


222  FOUNDRY  COST  ACCOUNTING 

However,  as  noted  above,  it  is  not  always  practicable 
to  treat  these  costs  as  direct,  and  when  this  is  the  case,  it  has 
been  found  that  the  molding  direct  labor  affords  the  most 
equitable  basis  by  which  these  expenses  can  be  distributed.  The 
molding  direct  labor  basis  proves  a  remarkably  true  one  because 
light  work  costs  more  per  pound  to  mold  than  heavy  work  and 
it  invariably  costs  more  to  trim  and  to  inspect.  A  number  of 
tests  in  different  foundries  have  proven  that  by  using  the  mold- 
ing direct  labor  as  a  basis  of  distribution  the  results  are  not 
materially  different  from  those  obtained  by  carefully  and  labori- 
ously keeping  track  of  the  cost  of  trimming  and  inspecting  each 
particular  kind  of   work. 

The  cost  of  trimming  cored  work,  it  will  be  found,  bears 
a  fairly  close  relation  not  only  to  molding  labor  but  to  the 
coremaking  labor.  With  an  increase  in  cores  there  is  an 
increase  in  trimming  as  there  is  a  greater  amount  of  fins  to 
break  off.  The  decrease  in  the  number  of  pieces  the  molder 
is  able  to  produce,  however,  due  to  the  setting  of  cores,  com- 
pensates for  the  increased  trimming  per  piece.  In  other  words, 
the  trimmer  in  handling  the  molders  daily  output  has  a  greater 
amount  of  work  to  do  per  piece  but  fewer  pieces  to  handle. 

Annealing  Department 

There  is  only  one  satisfactory  basis  to  distribute  the  costs 
of  annealing,  and  that  is  the  weight  basis.  While  it  is  true 
that  light  and  rangy  work  requires  more  time  to  pack  than 
does  heavier  work  and  the  weight  that  can  be  packed  in  a  pot 
is  less,  yet  neither  the  difference  in  time  nor  in  weight  is 
ordinarily  great.  Light  work  is  usually  packed  with  heavy 
cored  and  rangy  work  to  save  packing  material  and  in  this 
way  the  costs  are  fairly  well  equalized. 

Finishing   and   Shipping   Department 

In  quite  a  few  foundries  the  plant  practice  is  to  keep 
the  operations  of  finishing  and  shipping  separately.  When 
this  is  the  case  it  is  advisable  to  have  the  accounting   follow 


PRODUCT  COSTS  223 

the  plant  practice  and  to  provide  cost  divisions  for  finishing 
and  shipping.  In  a  great  many  foundries,  however,  the  opera- 
tions of  finishing  those  castings  that  require  grinding,  straight- 
ening, punching,  etc.,  and  of  sorting  and  bagging  for  shipping, 
or  loading  on  cars,  are  so  intermingled  that  it  is  futile  to 
attempt  to  follow  departmental  lines  and  to  separate  the  purely 
shipping  costs  from  those  of  finishing. 

Whether  the  costs  of  finishing  and  shipping  are  stated 
separately  or  combined,  the  direct  labor  costs  of  such  opera- 
tions of  finishing  those  castings  that  require  grinding,  straight- 
gauging,  etc.,  should  be  charged  to  the  job  or  work  requiring 
the  additional  operation.  It  is  manifestly  unfair  to  burden 
work  not  requiring  finishing  operations  with  a  share  of  such 
costs,  and  to  lighten  the  burden  of  work  requiring  finishing 
operations  by  charging  a  part  of  the  cost  thereof  to  work 
not  requiring  finishing.  In  a  few  foundries  it  is  practicable 
to  provide  an  overhead  finishing  rate  to  apply  to  the  direct 
finishing  labor  cost,  but  as  a  rule  is  it  rarely  practicable,  so 
that  a  small  amount  of  cost  that  should  by  right  go  with 
the   finishing  labor  has  to  be  applied  as   a  general  overhead. 

All  finishing  and  shipping  costs,  therefore,  other  than 
the  finishing  direct  labor,  generally  have  to  be  prorated  in 
some  manner  over  the  work  produced.  At  first  thought  it 
would  seem  that  a  weight  basis  here  would  be  an  equitable 
one,  but  on  an  analysis  of  the  situation  it  becomes  evident  that 
the  indirect  costs  of  finishing  and  shipping  are  not  in  rela- 
tion to  weight,  but  more  nearly  in  relation  to  the  molding 
direct  labor,  or  the  molding  hours.  For  instance,  the  time 
required  to  sort,  count  and  inspect  a  given  weight  of  light 
work  is  a  great  deal  more  than  for  the  same  weight  of  heavy 
work.  Careful  examination  and  time  study  at  a  great  number 
of  foundries  demonstrated  that  the  indirect  costs  of  finishing 
and  shipping  bear  a  remarkably  close  relation  to  the  time  spent 
in  molding  and  to  the  molder's  earnings. 

Occasionally,  on  certain  types  of  castings,  it  is  more 
economical    to    drill   than   to   core,   and   when   this   practice   is 


224  FOUNDRY  COST  ACCOUNTING 

followed  the  finishing  department,  in  a  sense,  performs  the 
work  of  the  core  department.  If,  in  such  cases,  the  cost  of 
drilling  is  distributed  as  a  general  overhead  expense  it  is 
evident  that  the  cost  of  the  individual  job  in  respect  to  both 
the  core  cost  and  the  finishing  cost  is  inaccurately  stated.  It 
is  the  practice  of  certain  foundries,  in  such  cases,  to  treat 
the  drilling  labor  cost  as  coremaking  direct  labor,  and  where 
finishing  work  is  not  treated  as  a  direct  charge  this  practice 
is  to  be  recommended.  However,  if  all  finishing  work  of  the 
nature  of  drilling,  punching,  reaming,  grinding,  straightening, 
etc.,  is  treated  as  a  direct  charge,  as  it  should  be  in  every 
case,  there  is  nothing  gained  by  considering  drilling  as  a  core 
expense. 

Either  the  molding  direct  labor  basis  or  the  molding  hour 
basis  should  be  used  to  distribute  the  indirect  expenses  of  the 
finishing  and  shipping  department. 

General  Expense 

A  great  deal  can  be  said  both  for  and  against  any  reason- 
able basis  that  might  be  suggested  for  distributing  general  over- 
head expense  of  the  nature  of  office  salaries  and  expense,  selling 
expense  and  the  various  expenses  of  a  business  of  a  general 
nature. 

The  basis  most  generally  used  is  that  of  weight.  Some 
use  molding  direct  labor,  and  in  rare  cases,  the  molding  hour 
basis  is  used. 

The  expenses  under  this  head,  to  a  very  large  extent, 
are  fixed  and  cannot  be  curtailed  when  the  volume  of  business 
is  reduced.  For  this  reason,  they  vary  per  ton  markedly 
according  to  the  production  of  the  plant.  Such  costs  per  unit 
of  production  can  be  said  to  vary  directly  with  the  output. 
The  costs  will  be  high  with  a  low  output,  low  with  a  high 
output,  and  normal  with  a  normal  output.  Evidently,  then, 
for  purposes  of  comparisons  and  quotations,  all  general  ex- 
penses of  a  fixed  nature  should  be  figured  on  a  normal  out- 
put.    If,  in  times   of  depression  and  small  output,  costs  were 


PRODUCT  COSTS  225 

figured  on  the  current  production,  they  would  be  too  high  to 
obtain  business,  and,  in  times  of  large  production,  they  would 
be  too  low  to  be  safely  followed  for  price-making.  There- 
fore, using  a  normal  output  as  a  basis  tends  to  equalize  both 
costs  and  profits. 

A  normal  state  of  business  should  be  reckoned  with, 
regardless  of  the  basis  used  to  distribute  the  general  expense 
over  the  different  classes  of  work  produced.  If  the  ton- 
nage basis  is  used,  the  factor  is  a  normal  production;  if  the 
molding  direct  labor  basis  is  used,  the  factor  is  a  normal 
molders'  pay  roll;  and  if  the  rudders'  hour  basis  is  used, 
the  factor  is  the  normal  molding  hours. 

Generally,  the  molding  hour  basis  gives  the  most  accurate 
results  as  it  places  on  light  work  the  burden  it  should  carry! 
On  a  weight  basis,  work  on  which  the  output  is  small  does 
not  receive  the  share  of  overhead  expense  that  it  should 
with  the  result  that  the  apparent  profit  is  considerably  in 
excess  of  the  true  profit. 

The  molding  direct  labor  basis  is  equally  as  good  as 
the  molding  hour  basis  when  the  earnings  of  molders,  as 
between  different  classes  of  work,  are  substantially  the  same. 

Summary 

While  the  bases  of  distribution  are  not  invariably  the 
same  for  all  foundries,  it  will  be  found  that  as  a  rule  condi- 
tions are  substantially  similar  and  the  same  standard  or  uni- 
form bases  can  be  used  with  good  results  for  the  individual 
company  and  excellent  results  for  the  particular  branch  of 
the  industry  as  a  whole. 

Summarizing,  the  most  equitable  and  practicable  bases 
of  distribution  applying  generally  are: — 

1.  Distribute  molding  indirect  costs  on  the  basis  of  the 

molding  direct  labor. 

2.  Distribute  coremaking  indirect  costs  on  the  basis  of 

the  coremaking  direct  labor. 

3.  Distribute  cleaning  costs  on  the  basis  of   the  weight 

of    good    castings    produced. 


226 


FOUNDRY  COST  ACCOUNTING 


4.  Distribute    trimming    and    inspecting    costs    on    the 

basis   of   the   molding   direct   labor. 

5.  Distribute  annealing  costs  on  the  basis  of  either  the 

weight  of  castings  annealed  of  the  weight  of  good 
finished   castings   produced. 

6.  Distribute  finishing  and  shipping  indirect  costs  on  the 

basis  of  the  molding  direct  labor. 

7.  Distribute    general    expense    on    the    basis    of    either 

molding   hours    or    molding    direct    labor. 

Importance     of    an     Equitable     Distribution     of     Overhead 
Expense 

Many  executives  do  not  appreciate  the  effect  and  influence 
that  different  bases  of  distributing  overhead  expense  have  on 
the  cost  of  the  product.  In  plants  where  different  kinds  of 
work  is  produced,  which  is  usually  the  case,  the  basis  of  distri- 
bution has  a  marked  effect  on  costs  and  if  the  costs  are  cor- 
rectly stated  the  basis  must  be  a  proper  one. 

As  previously  noted,  the  basis  of  weight,  where  both  light 
and  heavy  work  is  produced,  does  not  give  accurate  results. 
This  is  illustrated  in  the  following  tabulation,  which  gives  costs, 
using  different  bases,  of  10  jobs,  five  of  which  were  selected 
at  random  at  each  of  two  different  plants : 

Comparative  Costs,  Using  Different  Bases  to  Distribute 
Overhead  Expense 


Average 

Weight  of 

Casting 

(Lbs.) 

Average 

Production 

per  molder 

per  day 

(Lbs.) 

Total  Cost  pe 

r  100  lbs.  of  good  castings 

Job 
No. 

By  distributing 

overhead  on  a 

weight  basis 

By  distributing 

overhead  on  a 

molding  hour 

basis 

By  distrib- 
uting over- 
head on  a 
molding  di- 
rect labor 

basis 

1 

16.0 

1210 

$4.89 

$4.51 

$4.65 

2 

19.7 

1029 

5.15 

4.83 

4.92 

3 

4.8 

974 

5.77 

5.49 

5.52 

4 

28.1 

922 

5.13 

4.89 

5.06 

5 

12.5 

894 

5.55 

5.22 

5.34 

6 

1.3 

551 

5.34 

6.36 

6.06 

7 

1.1 

225 

6.87 

10.66 

10.31 

8 

.3 

223 

6.45 

11.01 

9.88 

9 

.4 

216 

8.61 

13.11 

12.75 

10 

.1 

201 

7.74 

13.65 

13.38 

PRODUCT  COSTS  227 

It  will  be  noticed  that  for  the  heavy  work,  ranging  in 
output  per  molder  per  day  from  1210  lbs.  to  894  lbs.,  there 
are  no  large  differences  in  cost  under  the  weight  basis,  the 
molding  hour  basis,  or  the  molding  direct  labor  basis,  although 
the  costs  on  the  weight  basis  are  somewhat  higher  than  on 
either  the  molding  hour  basis  or  the  molding  direct  labor 
basis.  The  costs  of  the  heavy  work  on  the  weight  basis  are 
really  overstated,  due  to  the  inequality  of  the  basis,  while  the 
costs  of   the  light  work  are   sadly  understated. 

On  the  light  work,  ranging  in  weight  from  1.3  lbs.  to 
0.1  lb.  per  piece,  and  in  output  per  molder  per  day  from  551 
lbs.  to  201  lbs.,  there  are  no  large  differences  in  cost  between 
the  molding  hour  basis  and  the  molding  direct  labor  basis, 
although  the  cost  under  the  weight  basis  is  decidedly  less. 
On  job  No.  7,  for  instance,  the  cost  on  the  weight  basis  is 
$6.87  per  100  lbs.,  while  on  the  molding  hour  basis  it  is 
$10.66,  and  on  the  molding  direct  labor  basis  $10.31,  differ- 
ences amounting  to  55%  and  50%  respectively.  On  the  still 
lighter  work,  jobs  Nos.  8,  9  and  10,  the  differences  are  even 
considerably  greater. 

It  will  be  noticed  also  that  on  the  light  work  the  cost 
on  the  molding  hour  basis  is  slightly  greater  than  on  the 
molding  direct  labor  basis.  This  is  due  to  the  fact  that  at 
the  two  plants  at  which  tests  were  made  the  earnings  of  mold- 
ers  on  light  work  were  less  than  on  heavy  work.  On  jobs 
Nos.  8  and  10,  for  instance,  the  average  labor  cost  per  hour 
for  molding  was  46.9c  and  47.3c  respectively,  while  for  jobs 
Nos.   1   and  2,  it  was   57.9c  and  56.9c,  respectively. 

The  fact  that  in  many  foundries  molders  on  light  work 
earn  less  than  those  on  heavy  work  makes  the  molding  hour 
basis,  to  that  extent,  a  better  basis  for  distribution  of  over- 
head than  the  molding  direct  labor  as  the  former  gives  a  higher 
cost  to  the  light  work,  the  cost  of  which  throughout  the  indus- 
try is  understated  and  underestimated. 

While  the  costs  shown  by  the  table  of  light  work  on  either 
the  molding  hour  basis,  or  on  the  molding  direct  labor  basis, 


228  FOUNDRY  COST  ACCOUNTING 

are  considerably  greater  than  on  the  weight  basis,  the  cost 
of  the  light  work  on  the  former  bases  is  still  sadly  under- 
stated from  the  standpoint  of  yielding  the  same  return  on  the 
investment  as  the  heavy  work  if  the  same  per  cent  of  profit  were 
added  to  the  cost  of  each. 

For  instance,  the  cost  of  job  No.  1,  on  the  molding  direct 
labor  basis,  is  $4.65  per  100  lbs.  If  a  profit  of  20%  were 
added,  the  profit  would  be  93c  per  100  lbs.  or  $11.25  on 
the  1210  lbs.  average  output  per  molder  per  day. 

In  contrast,  the  cost  of  job  No.  10,  on  the  molding  direct 
labor  basis,  is  $13.38  per  100  lbs.  A  profit  of  20%  would 
amount  to  $2.67  per  100  lbs.,  but  only  $5.36  on  the  201  lbs. 
average  output  per  molder  per  day — a  rate  of  profit  on  the 
investment  of  less  than  one-half  that  realized  on  the  heavier 
work  on  which  the  molder  was  able  to  get  out  a  larger  pro- 
duction. 

Job  Cost  Record 

A  form  of  cost  record  which  is  equally  suitable  to  record 
class  costs,  customer's  costs,  or  job  costs  is  shown  on  page  230. 
The  record  was  designed  for  and  is  in  use  by  a  large  number 
of  malleable  iron  foundries  and  with  a  slight  modification  is 
also  suitable  to  grey  iron  and  steel  foundries.  Figures  are 
inserted  to  illustrate  the  form  and  to  show  the  relation  to 
preceding  records  of  original  entry  as  well  as  methods  of 
distributing  overhead  expense. 

The  cost  accountant  should  study  and  analyze  the  cost 
record  most  carefully  and  gejt  clearly  in  mind  its  rela- 
tion to  the  Statement  of  Monthly  Costs,  or  the  statement 
from  which  the  overhead  rates  are  obtained. 

The  name  of  the  customer,  the  pattern  number,  the  mold- 
ing hours,  the  pounds  of  metal  poured,  the  total  pieces  made, 
the  pieces  good  and  pounds  good,  as  well  as  the  molding 
direct  labor,  are  filled  in  from  the  molder's  summary  produc- 
tion card,  an  illustrated  form  of  which  is  shown  on  page  86. 


PRODUCT  COSTS  229 

The  information  as  to  shipping  room  defectives,  both 
pieces  and  pounds,  is  filled  in  from  the  shipping  room  reports. 
The  entry  of  82  pounds  inserted  over  the  weight  of  the 
defectives  is  assumed  to  represent  (in  malleable  iron  practice) 
the  annealing  and  finishing  loss  which  is  one  per  cent  of  the 
weight  of  good  hard  iron  castings  produced  and  is  approxi- 
mately what  the  loss  runs  in  practice. 

The  cost  of  the  metal  used  is  determined  by  applying 
to  the  weight  of  good  finished  castings,  8,006  pounds,  the 
metal  cost  per  100  pounds  of  good  finished  castings,  namely 
$1,841,  shown  at  the  bottom  of  the  Monthly  Statement  of 
Total  Costs,  page  199. 

The  melting  cost  is  determined  by  applying  to  the  weight 
of  metal  poured,  13,860  pounds,  the  melting  cost  rate  per  100 
pounds  of  molten  metal,  namely  $0,255,  shown  at  the  bottom 
of  the  Monthly  Statement  of  Total  Costs,  page  199. 

The  coremaking  direct  labor  is  filled  in  from  the  core- 
maker's  summary  production  card,  an  illustrated  form  of  which 
is  shown  on  page  100. 

The  special  pattern  and  flask  expense  and  the  finishing 
direct  labor  come  from  the  reports  of  the  pattern  shop  and 
the    finishing    department,    respectively. 

The  molding  overhead  charge  is  determined  by  applying 
to  the  molding  direct  labor  the  molding  overhead  rate,  namely 
166.0%  shown  at  the  bottom  of  the  Monthly  Statement  of 
Total  Costs,  page  199. 

The  coremaking  overhead  charge  is  determined  by  apply- 
ing to  the  coremaking  direct  labor  the  overhead  rate  of  the 
coremaking  department,  namely  90.0%,  shown  at  the  bottom 
of  the  Monthly  Statement  of  Total  Costs,  page  199. 

The  tonnage  overhead  charge  is  determined  by  applying 
to  the  weight  of  good  finished  castings,  8,006  pounds,  the 
tonnage  overhead  rate,  namely  $0,859  per  100  pounds,  shown 
at  the  bottom  of  the  Monthly  Statement  of  Total  Costs, 
page  199. 


230 


FOUNDRY   COST  ACCOUNTING 


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232  FOUNDRY  COST  ACCOUNTING 

The  total  cost,  in  amount,  is  found  by  a  cross  addition, 
and  the  cost  per  100  pounds  of  good  castings  by  dividing  the 
amount  by  the  weight  of  good  finished  castings  produced. 

Job  Cost  Card 

The  production  of  good  finished  castings  by  months,  by  pat- 
tern numbers,  should  be  summarized  in  card  form  for  the  ready 
information  of  the  executive.  The  executive,  or  the  sales 
department,  is  interested  only  in  the  final  results,  namely,  pro- 
duction in  pieces  and  pounds,  cost,  profit,  and  rate  of  profit. 
The  rate  of  profit  can  best  be  shown  in  terms  of  profit  per 
molder  per  day  or  per  unit  of  molding  floor  space. 

The  production  cost  of  each  pattern  of  casting,  through- 
out the  year,  or  for  any  longer  period  desired,  can  be  con- 
veniently shown  on  a  card.  A  record  of  this  nature  should 
be  prepared  for  the  use  and  guidance  of  the  executive  and  if  it 
gives  for  each  pattern  the  information  shown  by  the  follow- 
ing form,  namely,  pieces  and  weight  of  good  castings  pro- 
duced, returns  or  rejections,  cost,  price,  and  profit  per  100 
pounds,  and  profit  per  molder  per  day,  it  contains  all  of 
the  vital  information  that  the  busy  executive  really  needs.  A 
record  of  this  character  for  each  and  every  pattern  of  casting 
produced  will  be  found  to  be  invaluable. 


PRODUCT  COSTS 


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CHAPTER  X 
DEPRECIATION 

Depreciation  Inevitable 

Depreciation,  which  is  shrinkage  in  value  due  to  exhaus- 
tion, wear  and  tear,  is  taking  place  in  some  form  or  another 
in  buildings  and  equipment  of  every  description,  more  rapidly 
and  perceptibly  in  some,  slower  in  others.  Their  value  and  use- 
fulness is  being  gradually  reduced  until  the  time  will  come 
when  they  must  be  cast  aside  as  no  longer  fit  for  use.  The 
equipment  that  today  represents  the  highest  type  of  efficiency 
is  gradually  but  inevitably  wending  its  way  to  the  scrap  heap, 
regardless  of  the  efforts  that  may  be  taken  to  preserve  it 
through    repairs. 

Some  manufacturers  contend  that  if  their  equipment  is  kept 
in  good  repair  it  does  not  depreciate,  and  as  long  as  their  out- 
put is  maintained  as  to  quality  and  quantity  the  equipment 
retains  its  value  to  the  concern.  However,  depreciation,  to  a 
large  extent,  is  unavoidable  and  waste  cannot  be  entirely  offset 
by  repairs  no  matter  how  extensive.  Repairs,  it  is  true,  offset 
to  a  certain  extent  physical  deterioration  and  lengthen  the 
period  of  serviceability,  but  no  matter  how  extensive  they  may 
be,  it  is  impossible  through  repairs  to  fully  maintain  plant  and 
equipment  values. 

Causes    of    Depreciation 

Depreciation  may  be  due  to  several  causes — use,  lapse  of 
time,  obsolescence,  inadequacy.  The  most  common  form  of 
depreciation  is  that  occasioned  through  use.  The  depreciation, 
due  to  wear  and  tear  incident  to  use,  is  always  present.  It  is 
more  or  less  continuous  and  if  unaccompanied  with  other  causes 
can  be  fairly  accurately  reckoned. 

235 


236  FOUNDRY  COST  ACCOUNTING 

Depreciation  also  takes  place  though  the  equipment  remains 
idle.  Property  may  deteriorate  even  more  rapidly  when  idle 
than  when  in  use.  Depreciation  arising  from  idleness  is  very 
frequently  overlooked  but  it  is  present  nevertheless. 

Another  form  of  depreciation  is  that  of  obsolescence.  The 
termination  of  the  life  of  a  melting  furnace,  an  annealing  oven, 
a  molding  machine,  may  be  due  to  the  discovery  of  some  better 
method  for  doing  the  same  work  which  makes  it  uneconomical 
and  expensive  to  continue  under  the  old  method. 

Depreciation  due  to  obsolescence  is  hard  to  estimate  be- 
cause the  progress  in  inventions  and  changes  in  methods  are 
uncertain.  In  the  foundry  industry,  due  to  somewhat  stable 
conditions,  the  liability  to  obsolescence  is  less  than  in  some 
other  industries,  but  every  progressive  foundryman  should  be 
alert  to  the  fact  that  although  his  equipment  may  now  be  the 
best  obtainable  it  may  be  rendered  of  less  value  at  any  time 
by  inventions  and  changes  in  methods. 

Methods  of  Providing  for  Depreciation 

An  arbitrary  deduction  of  an  estimated  lump  sum  amount 
to  cover  depreciation  on  the  entire  buildings  and  equipment, 
apart  from  poor  accounting  practice,  is  poor  business  policy 
and  usually  totally  inadequate  to  show  even  reasonably  true 
results.  At  best,  the  degree  to  which  machinery  or  other  equip- 
ment lessens  in  value  in  a  stated  period  is  a  matter  of  estimate. 
It  is  necessary,  therefore,  in  order  to  arrive  at  an  estimate,  as 
nearly  actual  as  possible,  that  a  suitable  classification  of  the 
equipment  be  made  to  enable  an  intelligent  conclusion  to  be 
reached  as  to  the  amount  of  depreciation  that  has  actually 
taken  place. 

The  first  step  necessary  to  provide  for  proper  depreciation 
is  to  departmentize  building  and  equipment  values.  The  next 
step  is  to  take  each  kind  of  building  and  equipment  and  figure 
its  proper  depreciation.  The  rates  will,  of  course,  vary,  de- 
pending upon  the  life  of  the  property,  the  life  being  dependent 


DEPRECIATION  237 

upon  its  character,  the  use  to  which  it  is  put,  and  the  conditions 
under  which  it  is  used.  In  a  foundry,  a  large  part  of  the  equip- 
ment is  subjected  to  exceptionally  hard  usage  and  consequently 
has  a  short  life. 

There  are  several  methods  of  providing  for  depreciation. 
One  method  that  is  unqualifiedly  condemned  but  which  is 
extensively  used,  is  to  wait  until  the  end  of  the  year,  and  then 
if  the  profit  and  loss  statement  shows  that  a  good  profit  has 
been  earned,  to  charge  a  part  of  this  profit  to  depreciation.  If, 
on  the  other  hand,  the  profit  and  loss  statement  shows  little 
or  no  profit  nothing  is  charged  for  depreciation.  It  is  difficult 
to  see  how  any  practical  business  man  can  take  the  view  that 
his  plant  and  equipment  have  not  depreciated  because  he  has 
not  made  a  profit  and  have  depreciated  when  he  has  made  a 
profit. 

The  practice  of  writing  off  round  sums  for  depreciation  in 
an  arbitrary  manner  depending,  in  a  very  large  measure,  upon 
the  earnings  of  the  year  has  been  fostered  through  the  inclina- 
tion of  boards  of  directors  to  make  as  good  a  profit  showing 
as  possible  in  bad  years.  No  board  of  directors  has  the  right, 
nor  is  it  fair  to  stockholders  to  deceive  them  in  this  way 
And  when  the  deficiency  is  made  up  the  following  year,  the 
offense  is  not  lessened,  for  it  is  impossible  at  that  time  to  know 
whether  the  next  year  will  be  better  or  worse.  Directors  resort- 
ing to  this  practice  often  put  themselves  in  the  position  of 
declaring  dividends  not  out  of  profits  but  out  of  capital. 

Straight  Percentage  Method 

This  method  is  to  estimate  the  scrap  value  and  deduct  it 
from  the  initial  cost.  The  remainder  is  then  divided  by  the 
estimated  number  of  years  of  usefulness  and  the  result  is  the 
annual  depreciation.  This  method  is  free  from  complications 
and  is  always  practicable  of  application. 


238  FOUNDRY  COST  ACCOUNTING 

Reducing  Balance  Method 

Under  this  method,  a  percentage  is  determined  which,  when 
applied  to  the  initial  cost,  will  leave  only  the  scrap  value  of 
the  particular  piece  of  equipment  on  the  books  at  the  expiration 
of  its  estimated  life.  To  illustrate,  if  the  initial  cost  is  $1,000 
and  the  estimated  scrap  value  is  $200,  with  an  estimated  life 
of  10  years,  then  $800  would  be  charged  into  cost  during  that 
period.  To  attain  this  end,  a  rate  of  15%  would  be  necessary, 
which  would  make  the  depreciation  15%  on  $1,000  or  $150 
the  first  year,  15%  on  $850,  or  $127.50,  the  second  year,  and 
so  on.  The  advantage  of  this  method,  in  the  interest  of  normal 
costs,  is  that  the  decrease  in  depreciation  charges  is  ordinarily 
offset  by  an  increase  in  repairs.  It  also  throws  the  heaviest 
depreciation  charges  upon  the  first  few  years  when  the  efficiency 
and  economy  of  the  asset  is  the  greatest.  The  method  though 
is  somewhat  complicated  and  considerably  more  difficult  of 
application  than  the  straight  percentage  method. 

Combined   Depreciation  and   Maintenance   Method 

Another  method  of  providing  for  depreciation  which  is 
generally  used  with  good  results  is  to  add  to  the  initial  cost 
of  the  equipment  the  estimated  cost  of  maintenance  during  its 
life  before  fixing  the  depreciation  rate.  For  example,  if  the 
initial  cost  is  $1,000,  scrap  value  is  $200,  and  the  estimated 
maintenance  cost  during  its  life  (10  years)  is  $400,  the  total 
cost  of  the  machine,  after  salvage,  would  be  $1,200,  or  120% 
of  the  initial  cost.  Dividing  this  percentage  by  the  estimated 
life  of  the  machine  (10  years)  gives  12%,  which  is  the  rate 
at  which  the  machine  depreciates  and  is  the  charge  to  manufac- 
turing cost  covering  depreciation  and  maintenance.  The  advan- 
tage of  this  method  is  that  it  does  not  become  necessary  to 
differentiate  between  depreciation  and  maintenance  which  must 
be  done  under  either  of  the  first  two  methods  mentioned.  In  a 
foundry,  it  is  oftimes  very  difficult  to  draw  the  line  and  this 
metho'd,  therefore,  has  a  great  deal  to  commend  it. 


DEPRECIATION  239 

Repairs  and  Their  Treatment 

The  question  as  to  whether  certain  expenditures  are  of 
the  nature  of  repairs  or  are  proper  charges  against  a  deprecia- 
tion reserve  is  one  that  often  puzzles.  The  expenses  that  are 
necessary  to  maintain  buildings  and  equipment  in  an  efficient 
working  condition  vary  from  minor  repairs  to  heavy  and  extraor- 
dinary repairs,  such  as,  renewing  roofs  of  buildings,  replacing 
parts  of   engines,   etc.,   involving  considerable  outlay. 

The  general  principle  to  follow  is  to  charge  all  minor 
repairs,  that  are  of  fairly  constant  occurrence  and  which  do  not 
appreciably  prolong  the  life  of  the  property,  to  costs  of  pro- 
duction for  the  period  in  which  they  are  incurred.  Such 
expenditures  as  roofing  a  building,  replacing  boilers,  relining 
tumbling  barrels,  etc.,  or  those  that  do  appreciably  prolong 
the  life  of  the  property  and  are  not  fairly  chargeable  against 
the  period  in  which  incurred,  should  be  charged  to  the  de- 
preciation reserve,  as  such  replacements  restore  to  that  extent 
equipment  values  and  reduce  the  accrued  depreciation. 

Repairs  and  Replacements 

In  many  foundries  no  differentiation  is  made  between 
repairs  and  replacements,  and  both  ordinary  repairs  and  com- 
plete replacements  or  renewals  are  treated  as  repairs  and 
charged   to   current   operating   costs. 

While  this  practice  is  a  conservative  one  from  the  stand- 
point of  financial  accounting  it  is  not,  however,  in  accordance 
with  good  accounting  principles  and  practice. 

Replacements  and  renewals  restore  plant  and  equipment 
values,  and  to  that  extent  they  are  depreciation  negatives* 
or  offsets,  and  the  cost  thereof  should  be  charged  not  to 
repairs  but  to  the  depreciation  reserve  account.  The  depre- 
ciation already  provided  for  has  been  set  up  for  this  very 
purpose  and  through  the  replacements  and  renewals  plant 
and  equipment  values  are  restored  and  the  accrued  deprecia- 
tion thereon  has  been  reduced. 


240  FOUNDRY  COST  ACCOUNTING 

The  effect  of  treating  replacements  and  renewals  as  re- 
pairs is  to  materially  increase  the  repair  accounts  and  to 
reduce  the  depreciation  charge.  The  depreciation  provision 
then  applies  solely  to  that  equipment  or  that  part  of  the 
equipment  the  value  of  which  cannot  be  restored  through 
replacements. 

It  is  true  that  the  final  results  in  the  long  run  will  be 
the  same  whether  replacements  and  renewals  are  treated  as 
repairs,  thus  reducing  the  depreciation  charge,  or  as  replace- 
ments, thus  increasing  the  depreciation  charge.  It  is  not 
results  in  the  long  run,  however,  for  which  we  are  looking. 
We  are  looking  for,  and  urgently  need,  current  operating 
statistics  for  analytical  and  comparative  purposes,  as  only 
in  this  way  can  we  be  sure  that  the  plant  for  the  current 
period  is  operating  as  efficiently  as  for  the  past  period.  When 
extensive  and  costly  replacements  which  are  incurred  only 
occasionally  and  quite  intermittently  are  treated  the  same 
as  ordinary  repairs  which  are  incurred  in  a  marked  degree  of 
regularity,  the  effect  is  to  badly  distort  costs,  not  only  for  com- 
parative and  analytical  purposes,  but  for  price-making  purposes. 

Very  often  it  is  the  case  that  labor  costs  only  are  used 
for  purposes  of  judging  of  the  operating  efficiency  of  the 
various  departments,  omitting  from  consideration  all  other 
items  of  cost.  This  is  due  to  the  fact  that  items  other  than 
labor  for  given  periods  are  not  comparable,  and  the  reason 
that  they  are  not  comparable  lies  in  the  faulty  handling  of 
the  expense  items.  There  is  no  reason  but  that  expense  items 
can  be  handled  just  as  satisfactorily  and  as  accurately  as 
labor  costs,  and  a  comparison  and  analysis  of  expense  items 
is  just  as  productive  of  results  as  a  comparison  and  analysis 
of  labor  costs.  Wastage,  leaks  and  inefficiency  are  as  often 
found  with  respect  to  material,  supplies,  repairs  and  other 
controllable  items  of   cost  as  with   respect  to   labor. 


DEPRECIATION  241 

Rates  of  Depreciation 

While  it  is  true  the  life  of  property  depends  upon  its 
character,  the  use  to  which  it  is  put,  and  the  conditions  under 
which  it  is  used,  it  is  also  true  that  within  an  industry  the 
rates  at  which  equipment  depreciates  are  fairly  applicable  to 
all  manufacturers.  In  a  number  of  industries  appreciable 
progress  has  been  made  in  establishing  uniform  rates  and 
the  members  are  following  them  with  most  satisfactory 
results. 

Standards  can  be  followed  in  the  foundry  industry  with 
very  satisfactory  results.  There  is  an  urgent  need  in  the  found- 
ry industry  for  greater  uniformity.  The  results  would  be  felt 
in  stabilizing  trade  conditions  and  in  a  more  equitable  distribu- 
tion of  income  taxes.  Without  reliable  industry  standards,  the 
matter  of  depreciation  rates  and  their  effect  on  taxes  is  left 
largely  to  the  tax  inspectors  of  the  several  districts.  Rates 
that  one  inspector  will  pass  as  only  adequate  will  be  disallowed 
by  another  inspector  as  grossly  excessive.  When  more  or  less 
standard  rates,  proven  and  borne  out  by  experience  as  fair, 
are  used  quite  generally  throughout  an  industry,  the  question 
of  a  proper  or  an  improper  charge  can  be  readily  determined. 

It  has  been  found  to  be  the  experience  of  a  large  number 
of  foundrymen  and  of  appraisers  and  accountants  familiar  with 
foundry  practice  that  the  following  annual  rates  for  deprecia- 
tion for  the  principal  kinds  of  foundry  buildings  and  equipment 
are  necessary  to  fully  maintain  plant  and  equipment  values: 

Buildings  : 

Per  Cent 

Concrete     2J^ 

Brick — Steel    Frame    3 

Brick — Wood     Frame     3ZA 

Sheet    Iron — Steel    Frame 

Wood     7XA 

Melting  Department  Equipment: 

Per  Cent 

Cupolas   and   Apparatus    5 

Air  Furnaces  and  Apparatus 7l/2 

Open   Hearth   Furnaces   and  Apparatus 10 


242  FOUNDRY  COST  ACCOUNTING 


Electric   Furnaces  and  Apparatus 10 

Crucibles      7j^ 

Sprue   Mill  and  Slag  Washer 15 

Laboratory    Equipment    10 

Tensile   Testing   Machines    5 

Traveling    Cranes     7j^ 

Hand    Trucks    10 

Molding  Department  Equipment: 

Per  Cent 

Flasks— Steel     15 

Flasks — Grey    Iron    33  1/3 

Flasks — Malleable    Iron     33  1/3 

Flasks — Aluminum     20 

Air   Molding   Machines    20 

Hand   Squeezers    15 

Benches,    Tables,    Racks,    Etc 10 

Sand    Mixers    15 

Pattern   Shop   Equipment    10 

Carpenter  Shop  Equipment    10 

Hand    Trucks    10 

Core  Department  Equipment: 

Per  Cent 

Core   Ovens  and  Apparatus — Steel 7*A 

Core  Ovens  and  Apparatus — Brick 10 

Core     Machines     15 

Oil    Separators    TYz 

Sand    Mixers    15 

Benches.    Tables,    Racks,    Trays,    Etc 10 

Hand    Trucks    7Y2 

Cleaning  Department  Equipment: 

Per  Cent 
Tumbling  Barrels,   with   Motor,   Shafting  and   Belt- 
ing       15 

Sand     Blast    Barrels     and     Tables,    with     Motor, 

Shafting    and    Belting    25 

Exhaust    System    10 

Trimming  and  Inspecting  Department  Equipment: 

Per  Cent 

Benches,   Scales,   Trucks 10 

Emery  Wheel   Stands,  with   Motor,   Shafting  and 

Belting     10 

Annealing  Department  Equipment: 

Per  Cent 

Annealing   Ovens   and   Apparatus    . 7lA 

Annealing    Trucks — Steam,    Air    and    Electric 20 

Traveling    Cranes     7^ 

Pyrometers         10 


DEPRECIATION  243 

Finishing  and  Shipping  Department  Equipment: 

Per  Cent 
Emery  Wheel  Stands,     Drop     Hammers,     Lathes, 
Drill   Presses,   Air   Chippers,    Milling   Machines, 

etc.,    with    Motor,    Shafting    and    Belting 10 

Automobile    Trucks     20 

Sorting  Tables,  Trucks,  Scales,  etc 10 

Power  Plant  Equipment: 

Per  Cent 

Steam    Boilers     5 

Electric    Generators    and    Switch    Boards 7l/2 

Waste    Heat    Boilers   and   Apparatus 10 

Air    Compressors    7^4 

Steam    Separators    10 

Steam    Piping    5 

Electric  Wiring  and  Fixtures 7l/i 

Engines,    Steam   and    Gas 5 

Heating   System,    Steam    5 

Brick    Stacks     5 

Pumps,  Steam  and  Hydraulic 5 

Industrial    Electric    Trucks    and    Tractors 25 

Truck    and    Tractor    Trailers 15 

Sprinkler    System     5 

Sewers      2l/2 

Fences — Wooden    10 

Fences — Wire      7x/z 

Office   Furniture   and    Fixtures 10 

Experience  has  proven  the  above  depreciation  rates  to  be 
conservative,  and  it  is  very  doubtful  if  the  foundryman  who 
is  not  providing  for  depreciation  at  substantially  the  rates  noted 
above  is  fully  maintaining  his  plant  values. 


Replacements    Restore    Plant    Values    and    Reduce    Accrued 
Depreciation 

The  amount  provided  to  represent  the  deterioration  in 
plant  and  equipment  values  due  to  wear  and  tear  and  obso- 
lescence should  be  charged  monthly  to  cost  of  production  and 
credited  to  Buildings  and  Equipment  Depreciation  Reserve 
accounts.  Against  the  reserve  accounts  should  be  charged  all 
expenditures  in  the  nature  of  complete  renewals  and  replace- 
ments  which   to  that  extent  restore   plant  values   and   reduce 


244  FOUNDRY  COST  ACCOUNTING 

the  accrued  depreciation.  Current  repairs  and  partial  renewals 
of  an  inextensive  nature  should  be  charged  directly  to  cost  of 
production. 

Until  within  the  past  few  years,  many  foundrymen  neg- 
lected to  systematically  provide  for  depreciation.  Their  prac- 
tice was  to  charge  all  repairs  and  replacements  to  costs  and 
then  in  years  with  good  profits,  a  round  sum  would  be  charged 
off.  In  later  years,  however,  the  high  income  and  excess  profits 
taxes  have  resulted  in  a  much  fairer  distribution  of  deprecia- 
tion charges  by  having  the  operations  of  each  year  stand  on 
their  own  merits  irrespective  of  the  profits  before  providing 
for  depreciation. 

Where  a  foundry  has  been  in  the  custom  of  charging  all 
or  practically  all  replacements  to  current  operations  and  has 
changed  over  from  a  hit  and  miss  rule  in  providing  for  depre- 
ciation to  a  more  logical  and  conservative  basis  by  applying 
definite  depreciation  rates,  caution  should  be  taken  not  to  over- 
provide  by  continuing  to  charge  all  replacements  to  costs.  If 
this  is  done  there  is  a  doubling  up  in  the  depreciation  charge 
for  the  reason  that  the  depreciation  rate  reflects  the  rate  of 
deterioration  and  when  the  deterioration  is  made  good,  or  par- 
tially so,  the  cost  of  the  replacement  should  be  an  offset  to 
the  depreciation  set  up  and  not  a  charge  to  current  operations. 
For  example,  the  normal  life  of  an  air  molding  machine  may 
be  five  years  and  if  one-fifth  of  its  cost  is  written  off  each  year 
for  five  years  and  during  the  fourth  and  fifth  years  most  of 
its  important  wearing  parts  are  replaced  and  the  cost  thereof 
is  charged  to  current  operations  instead  of  the  depreciation  set 
up,  the  result  is  an  overcharge  to  costs  to  the  extent  of  the 
expense  of  the  replacements.  In  other  words,  the  machine 
through  the  renewals  may  last  for  another  five  year  period 
and  upon  the  books  it  will  stand  as  completely  written  off.  The 
replacements  make  good  the  depreciation  that  has  taken  place, 
or  a  large  part  of  it,  and  the  cost  of  making  the  replacements 
is  a  charge  to  the  accrued  depreciation  set  up. 


DEPRECIATION  245 

Patterns,  Flasks,  Tools  and  Small  Equipment  Items 

The  foregoing  list  of  foundry  equipment,  with  normal  rates 
of  depreciation  set  opposite,  covers  only  such  equipment  that 
has  a  going  value  and  a  life  of  three  or  more  years.  In  a 
foundry,  there  is  a  long  list  of  smaller  equipment  consisting 
of  wood  flasks,  mold  jackets  and  bands,  patterns,  hand  tools, 
etc.,  the  entire  cost  of  which  should  be  charged  directly  to 
current  operations  and  not  be  charged  to  capital  for  the  reason 
that  the  life  of  such  equipment  is  so  uncertain  that  it  is  not 
safe  to  charge  any  part  thereof  to  capital.  In  equipping  a  new 
plant,  however,  the  initial  cost  of  such  minor  equipment  should 
be  charged  to  capital  but  thereafter  all  costs  for  replacements 
should  be  charged  directly  to  current  operations. 

Depreciation  of  Pattern  Equipment 

The  pattern  account  on  the  books  of  many  foundries  reflects 
a  value  far  in  excess  of  the  realizable  value  of  the  pattern 
equipment  and  even  in  excess  of  what  the  pattern  equipment 
is  reasonably  worth  to  the  company  as  a  going  concern.  A 
pattern  is  an  asset  that  should  be  valued  most  conservatively, 
and  the  safe  procedure  in  the  case  of  new  patterns  is  to  charge 
to  the  pattern  capital  account,  only  the  scrap  value  of  the  metal 
used  therein.  It  is  not  generally  practicable  nor  is  it  considered 
good  accounting  to  capitalize  the  cost  of  pattern  equipment  and 
then  depreciate  it  annually.  The  cost  of  all  pattern  equip- 
ment, other  than  the  scrap  value  of  the  metal,  is  a  direct  pro- 
duction charge  to  the  cost  of  the  product. 

Equipment  Inventory  Sheet 

As  already  noted,  in  order  to  arrive  at  proper  and  adequate 
depreciation  it  is  necessary  that  equipment  be  departmentized 
and  individual  depreciation  rates  applied  to  the  separate  items 
of  equipment.  To  accomplish  this  the  equipment  should  be 
listed  and  the  amount  of  the  annual  depreciation  applicable  to 
each  item  shown. 


246  FOUNDRY   COST  ACCOUNTING 

Ledger  accounts  can  either  be  kept  for  each  item  of  equip- 
ment or  for  the  entire  department  equipment,  and  likewise 
for  the  depreciation  reserve  accounts.  A  depreciation  reserve 
account  for  each  operating  department  is  usually  preferable  to 
separate  accounts.  It  is  always  better  to  set  up  depreciation 
as  a  reserve  rather  than  to  write  down  the  property  account. 

The  form  of  equipment  inventory  sheet  shown  on  the  fol- 
lowing page  can  be  used  ordinarily  with  good  results. 

When  records  are  prepared  in  this  or  in  a  similar  form 
the  following  information  is  always  available: 

(a)  The  book  value  of  equipment  by  departments. 

(b)  The    annual    amount    of    depreciation    provided    by 

departments. 

(c)  The  total  accrued  depreciation,  or  the  ledger  balance 

of  the  depreciation  reserve  account,  by  depart- 
ments, as  well  as  in  total  for  the  entire  plant. 
The  following  equipment  inventory  statement  calls  for  but 
a  single  depreciation  reserve  account  for  each  operating  depart- 
ment. The  total  amount  of  the  annual  depreciation  covering 
the  entire  department  equipment  being  credited  to  the  deprecia- 
tion reserve  account  and  the  cost  of  all  replacements  as  made 
during  the  year  being  charged  to  the  account. 

A  disadvantage  of  this  procedure  is  that  the  nature  of  the 
replacement  is  sometimes  lost  sight  of  and  because  of  this  some 
executives  and  accountants  prefer  a  more  detailed  equipment 
record  along  the  lines  shown  below. 

Detailed  Equipment  Record 

This  form  of  record  gives  a  complete  history  of  the 
equipment  and  the  value  of  the  data  will  be  found  to  be  well 
worth   the   additional   time   required  to   record   it. 

The  value  of  a  detailed  record  of  this  kind  is  that  you  al- 
ways have  before  you  a  history  of  the  performance  of  any  piece 
of  equipment  in  addition  to  having  a  record  of  its  original  cost, 
the  depreciation  provided  annually,  the  date,  nature  and  cost  of 


DEPRECIATION 


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replacements,  and  the  probable  depreciated  value  of  the  par- 
ticular piece  or  kind  of  equipment  at  any  time.  It  is  informa- 
tion that  an  executive  would  not  think  of  doing  without  once 
he  is  in  a  position  to  judge  its  value. 


EQUIPMENT  RECORD 

Article:  6  Universal  Tumbling  Barrels.                         Department:    Cleaning 

Year 

Book 

Value 

(Original 

cost) 

Depreciation 
for  year 

Less  Charges 
during  year  to 

Depreciation 
Reserve 
Account 

Accrued 

depreciation 

at  end  of 

year 

Depreciated 
Value 

Rate 

Amount 

1916 
1917 
1918 

$6,000 

15% 
15% 
15% 

$900 
900 
900 

i  "225 

1,410 
(Card  Record — 

$    900 
1,575 
1,065 

face) 

$   5,100 
4,425 
4,935 

REPLACEMENTS 

Date 

Vo. 

No. 

Description 

Amount 

1917 
Oct.  10 

1918 
Feb.  20 
Dec.  5 

241 

860 
1020 

New  Shell 

New  Drive  Cog  Wheels 
New  Shells 

(Card  Record — back) 

$  225 

380 
1,030 

CHAPTER  XI 

ESTIMATES  AND  QUOTATIONS 

Importance  of  Reliable  Estimates 

In  quoting  on  new  work,  most  foundrymen  appreciate  the 
vital  importance  of  reliable  estimates  of  costs  of  production. 
And  while  the  majority  of  them  make  an  earnest  effort  to  quote 
intelligently  on  new  work,  it  cannot  be  denied  that  the  practice 
of  guessing  at  what  the  selling  price  should  be  is  all  too  preva- 
lent. No  matter  how  earnest  may  be  the  desire  of  the  found- 
ryman  to  arrive  at  a  quotation  in  an  intelligent  manner,  it  is 
almost  impossible  for  him  to  do  so  unless  he  has  an  adequate 
cost  system  from  which  the  overhead  expense  ratios  can  be 
clearly  and  definitely  determined. 

Advantages  of  Preparing  Estimates  in  Uniform  Manner 

No  one  can  dispute  the  advantages  to  an  industry  if  esti- 
mates could  be  and  were  arrived  at  in  a  uniform  manner. 
There  is  no  question  but  what  a  standard  system  of  estimating 
could  be  evolved  and  which  could  be  followed  by  foundrymen 
generally. 

Of  course,  uniform  estimates,  or  a  standard  system  of 
estimating,  presupposes  substantial  uniformity  in  cost  methods, 
particularly  in  the  classification  of  accounts  and  in  the  methods 
of  distributing  indirect  or  overhead  expense.  In  industries 
where  uniform  principles  of  cost  accounting  are  generally  recog- 
nized and  followed  there  can  be  and  there  is  substantially 
uniformity  in  arriving  at  estimates,  and  the  benefits  accruing 
therefrom  are  recognized  and  appreciated. 

In  the  absence  of  uniform  fundamental  principles  of  cost 
accounting,  however,  it  is  practically  impossible  for  any  two 
foundrymen  to  arrive  at  even  approximately  the  same  quotation 

249 


250  FOUNDRY  COST  ACCOUNTING 

for  new  work  although  their  costs  on  which  the  estimates  are 
based,  had  they  been  arrived  at  on  the  same  basis,  would  not 
have  been  materially  different. 

Only  a  very  small  proportion  of  the  foundries  of  the  coun- 
try figure  in  advance  the  probable  cost  to  produce  the  widely 
different  types  and  designs  of  castings  on  which  they  are  called 
upon  to  quote  prices.  The  majority  of  them  either  do  not 
systematically  prepare  estimates  or  else  delegate  the  work  to 
some  one  not  in  touch  with  the  information  necessary  to  pre- 
pare an  intelligent  estimate.  In  the  few  foundries  where  esti- 
mates are  carefully  prepared  there  is  naturally  a  wide  variance 
of  methods  and  the  need  for  the  establishment  of  some  stand- 
ard system  of  estimating  on  new  work  is  plainly  evident. 

Preparing  and  Preserving  Estimates 

Before  quoting  on  new  work,  an  estimate  should  be  orderly 
and  carefully  prepared  and  religiously  preserved  so  that  the 
estimate,  item  by  item,  can  be  checked  against  the  cost  record 
after  a  cost  on  the  work  has  been  established.  A  comparison 
in  detail  is  of  special  benefit  in  disclosing  items  either  over- 
looked or  regularly  underestimated,  both  of  which  are  very 
common.  If  the  estimator  failed  to  reckon  with  such  items  as 
special  rigging,  pattern  and  flask  expense,  finishing  labor,  rejec- 
tions, etc.,  a  comparison  of  the  estimate  and  of  the  cost  will 
at  once  disclose  the  omission.  Often,  too,  the  molding  direct 
labor  is  underestimated  which  is  most  vital  because  so  many  of 
the  succeeding  items  of  cost  are  logically  based  on  the  molding 
labor,  and  if  the  molding  labor  is  understated  the  discrepancy 
is  multiplied  as  the  cost  compilation  progresses. 

Form  of  Estimate  Sheet 

The  form  of  estimate  sheet  shown  on  page  252,  in  which 
the  cost  accounting  principles  outlined  in  the  preceding  chap- 
ters are  observed,  is  suitable  to  most  foundries. 


ESTIMATES  AND  QUOTATIONS  251 

Explanation  of  Estimate  Sheet 

Metal — The  following  Estimate  Sheet  shows  the  total 
weight  of  castings  to  be  42,000  pounds,  found  by  ascertaining 
the  finished  weight  per  piece  of  each  pattern  of  casting  and 
multiplying  by  the  number  of  pieces  required.  If  the  melting  loss 
is  10%  in  weight,  the  order  would  require  the  use  of  46,200 
pounds  of  iron.  Assuming  a  prevailing  market  price  of  $1.50 
per  100  pounds  gives  a  metal  cost  of  $693.00. 

Melting — By  multiplying  the  number  of  molds  required 
to  produce  the  pieces  desired  of  each  pattern  by  the  weight 
per  mold  with  gate  and  sprue  gives  the  total  weight  of  molten 
metal  required;  or  in  other  words,  the  weight  of  the  molten 
metal  that  would  have  to  be  poured  into  the  molds  if  all  of  the 
molds  were  good.  In  the  instance  cited  above  it  is  59,000 
pounds.  The  melting  cost  per  100  pounds  of  molten  metal  is 
obtainable  from  the  Monthly  Statement  of  Total  Costs.  (See 
page  199).  At  the  melting  cost  rate  of  25.5  cents  per  100 
pounds  of  molten  metal  gives  a  melting  cost  of  $150.45,  if  all 
the  molds  were  good.  Assuming  a  foundry  loss  of  10%  would 
add  $15.05,  making  a  total  melting  cost  of  $165.50. 

Molding  Direct  Labor — Particular  care  should  be 
taken  in  arriving  at  the  estimated  cost  of  molding  as  the  amount 
of  direct  molding  labor  is  used  as  a  basis  to  distribute  a  large 
part  of  the  indirect  costs.  In  order  to  arrive  at  a  reliable 
and  satisfactory  estimate  for  molding  labor  it  is  necessary  to 
ascertain,  for  each  pattern  of  casting,  the  number  of  castings 
that  can  be  handled  in  a  mold,  the  number  of  molds  required, 
and  the  price  that  will  be  paid  for  molding,  based  upon  the 
number  of  molds  that  can  be  put  up  in  a  day's  time.  The 
price  per  mold,  or  per  100  molds,  times  the  molds  required 
gives  the  molding  direct  labor.  For  the  above  order  it  is 
estimated  that  the  molding  direct  labor  would  amount  to 
$270.00. 


252 


FOUNDRY  COST  ACCOUNTING 


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Metal,  42,000  lbs. 

Melting  Loss, 
Melting,  59,000  lbs 

Foundry  Loss 
Molding  Direct  La 
Special  Pattern  an 
Coremaking  Dired 
Finishing  Direct  L 
Molding  Overhead 

166.0%  of  mo 
Coremaking  Overh 

90.0%  of  core 
Tonnage  Overhead 

85.9c.  per  100 

Total  Estimated  C 

Estimated  Cost  pe 

Estimated  Output 

Molder  per 

W 

H 
H 

CO 

CD 

K-2 

8 

8     -: 

:1s 

iO 

© 

iO 

2 

1— 1 

S 

CO 

Q-3 

«# 

CN 

CO 

g 

Price 
per 
100 
Pes. 

8 

8      : 

o 

8 

8    8 

:    8 

00 

2    § 

co 

1 

:     O 

S»J 

m 

4- 

«     « 

© 

iO         © 

:| 

l 

<J 

1 

I     < 

w 
>     o 

Price 
per 
100 

O 

b~         iO 

o 

•• 

c 

1    u 

-o 

1 

1 

o   c"o 

CM 

i-H          00 

C 

1 

5z:-9s 

254  FOUNDRY  COST  ACCOUNTING 

Special  Pattern  and  Flask  Expense — It  is  estimated 
that  the  order  would  require  an  expenditure  of  $40.00  for  pat- 
terns and  flasks  of  a  special  nature. 

Coremaking  Direct  Labor — The  coremaking  direct 
labor  estimate  is  arrived  at  by  multiplying  the  number 
of  cores  required  for  each  pattern  of  casting  by  the  price  that 
would  be  paid  for  making  them.  For  the  above  order,  it  is 
estimated  that  the  coremaking  direct  labor  cost  would  amount 
to  $73.00. 

Finishing  Direct  Labor — It  is  assumed  that  two  of 
the  patterns  of  casting  would  require  grinding  for  which  it 
is  estimated  the  piece  rate  would  be  75  cents  and  $1.00  per 
100,  respectively,  making  a  finishing  direct  labor  cost  of  $35.00. 

Molding  Overhead  Charges — Assuming  that  the  month- 
ly cost  statement  shows  that  the  indirect  expenses  of 
the  plant  that  are  distributable  on  the  basis  of  the  molding 
direct  labor,  namely,  molding  indirect  labor  and  expense,  trim- 
ming and  inspecting,  finishing  and  shipping  indirect  expense, 
and  general  expense,  amount  to  166.0%  of  the  molding  direct 
labor,  there  should  be  added  under  the  above  head,  $448.20. 

Coremaking  Overhead  Charges — If  the  coremaking 
overhead  expense,  based  on  the  coremaking  direct  labor, 
amounted  to  90.0%,  there  should  be  added  for  coremaking 
overhead  charges,  $65.20. 

Tonnage  Overhead  Charges — Assuming  that  the 
monthly  cost  statement  shows  that  the  indirect  expenses  of  the 
plant  that  are  distributable  on  the  basis  of  weight,  namely,  costs 
of  cleaning,  annealing  and  provision  for  returns  and  allow- 
ances, amount  to  85.9  cents  per  100  pounds  of  good  castings, 
there  should  be  added  under  the  above  head,  $360.78. 

Summary — The  above  items  of  estimated  cost  give  a 
total  of  $2,150.68,  or  a  cost  of  $5.12  per  100  pounds.  The 
estimated  output  per  molder  per  day  is  866  pounds. 


ESTIMATES  AND  QUOTATIONS  255 

An  estimate  carefully  and  accurately  prepared  along  the 
above  or  similar  lines,  taking  into  consideration  the  average 
output  per  molder  per  day,  is  the  only  reliable  basis  upon 
which  a  price  can  be  safely  and  intelligently  made. 

Market  Price  of  Iron  Should  be  the  Iron  Quotation  Basis 

Quotations  should  be  on  the  basis  of  the  price  of  pig  iron 
prevailing  at  the  time  of  the  quotation.  It  is  not  considered 
good  business  practice  to  quote  on  the  basis  of  the  cost  of  iron 
on  hand  or  on  the  basis  of  purchases  extending  over  a  consid- 
erable period  of  time,  if  such  purchases  are  under  the  prevailing 
market  price. 

Using  the  cost  of  iron  as  a  quotation  basis  invariably  has 
the  tendency  to  lower  the  price  of  castings  and  to  stimulate 
unhealthy  competition  for  the  reason  that  cost  will  be  used  as  a 
basis  when  it  is  under  the  prevailing  market  price  and  never 
used  when  it  exceeds  the  market  price.  The  foundryman, 
therefore,  is  in  the  position  of  constantly  passing  along  to  his 
customer  the  benefit  of  profitable  speculative  purchases  and 
bearing  the  losses  of  unprofitable  speculative  purchases.  The 
effect  of  giving  customers  the  profit  from  speculative  buying 
is  not  alone  adverse  to  the  interests  of  the  individual  foundry- 
man  but  the  practice  has  the  tendency  to  depress  prices  and 
in  the  aggregate  has  a  decidedly  injurious  commercial  effect. 


CHAPTER  XII 
PROFITS 


Profit  Ideas 


Foundrymen  seem  to  be  substantially  in  accord  as  to 
what  constitutes  a  safe  and  reasonable  rate  of  profit  on  their 
investment.  As  the  investment,  per  ton  of  output,  of  plants  pro- 
ducing a  given  class  of  work  is  not  ordinarily  materially  differ- 
ent,, it  would  not  seem  that  there  should  be  such  wide  differences 
in  quotations,  and  if  all  foundries  knew  accurately  the  cost 
to  produce  each  job  or  each  class  of  work  they  handled  there 
would  not  be  such  extremely  wide  differences  in  quotations. 

The  trouble  is  that  most  foundrymen  do  not  know  their 
costs.  They  may  add  to  their  supposed  cost  a  rate  of  profit 
which  may  be  seemingly  equal  to  what  others  are  charging,  but 
the  expected  rate  of  profit  is  never  realized.  On  some  work, 
where  costs  are  not  accurately  known,  the  expected  rate  of 
profit  may  be  more  than  realized,  while  on  other  work  there 
may  be  a  serious  loss  instead  of  a  profit.  Wide  differences 
in  prices  quoted  are  not  as  a  rule  so  much  the  result  of  differ- 
ent ideas  of  profit,  or  different  actual  costs,  but  of  different 
ideas  of  cost. 

Profit  on  Light  and  Heavy  Work 

While  foundrymen  seem  to  be  substantially  in  accord  as  to 
what  constitutes  a  fair  rate  of  profit  on  investment,  nevertheless 
their  views  differ  widely  on  the  profit  that  should  be  realized 
on  different  kinds  of  work,  particularly  on  light  and  heavy 
work.  Many  feel  that  their  heavy  work  is  the  most  profitable 
even  though  their  records  are  inadequate  to  prove  it. 

It  is  a  serious  fact  that  with  most  companies  light  work 
is  the  least  profitable  and  the  heavy  work  the  most  profitable; 
and  heavier  work  is  ordinarily  decidedly  the  most  profitable. 

257 


258  FOUNDRY  COST  ACCOUNTING 

By  the  term  "light  work"  is  meant  not  necessarily  castings  light 
in  weight  but  where  the  output  per  molder  per  day  is  low  due 
to  the  nature  of  the  castings,  that  is,  rangy  with  thin  sections. 
A  good  output  per  molder  per  day  is  often  obtained  for  light 
solid  castings  where  a  number  of  them  can  be  gated. 

There  is  no  reason  why  light  work  should  not  be  just  as 
profitable  as  heavy  and  foundrymen  should  exert  every  effort 
to  make  it  so.  The  fact  that  light  work  is  unprofitable  as 
compared  with  heavy  work  has  arisen  from  the  practice  of  so 
many  foundrymen  of  applying  one  general  percentage  of  profit 
to  the  cost,  as  they  figure  it,  of  both  light  and  heavy  work. 
They  forget  that  in  the  foundry  business  a  general  percentage 
of  profit  on  the  cost  of  both  light  and  heavy  work  will  not 
give  the  same  return  on  the  investment,  unless  investment  and 
output  factors  are  taken  into  consideration.  The  facts  are  that 
the  output  factor  is  generally  overlooked  with  the  result  that 
the  cost  of  light  work  is  understated  and  that  the  percentage 
of  profit  on  the  investment  is  ordinarily  materially  less  when 
the  plant  is  running  on  light  work  than  when  running  on 
heavy  work. 

Production  Per  Molder  Per  Day,  the  Profit  Factor 

The  factor,  therefore,  that  should  be  constantly  borne  in 
mind  in  testing  the  accuracy  of  cost  work,  and  the  adequacy 
of  the  profit  margin,  is  the  average  production  per  molder  per 
day.  As  the  pound  is  the  unit,  the  output  per  molder  per  day 
in  pounds,  the  cost,  the  price  and  the  profit  per  pound  should 
go  hand  in  hand.  The  profit  per  pound  on  an  output  of  500 
pounds  per  molder  per  day  should  be  twice  as  great  as  on  an 
output  of  1,000  pounds  per  molder  per  day.  Otherwise,  the  low 
production  work  will  not  yield  as  high  a  return  on  the  invest- 
ment as  will  the  high  production  work.  It  is  almost  invariably 
the  case  in  foundry  practice  that  the  months  in  which  light 
work  predominates,  the  profit  showing  is  materially  less  than 
during  the  months  when  the  heavier  work  predominates.  If  a 
fairly  uniform  return  is  made  on  all   work  going  through   a 


PROFITS  259 

plant  it  is  necessary  to  have  the  profit  per  pound  follow 
the  average  output  per  molder.  Thus,  if  the  output  per  molder 
per  day  is  866  pounds,  and  the  cost  is  $5.12  per  100  pounds, 
as  is  assumed  on  page  253,  and  a  net  profit  per  molder  per  day 
of  $5.00  is  needed  to  yield  the  desired  return  on  the  invest- 
ment, the  profit  should  be  $0.58  per  100  pounds,  making  the 
price  $5.70  per  100  pounds.  The  rate  of  profit  on  cost  in  this 
case  would  be  11.3%.  If  the  output  per  molder  per  day  had 
been  but  433  pounds,  or  only  one-half  as  great,  the  profit 
would  have  to  be  $1.16  per  100  pounds  in  order  to  yield  the 
same  return  on  the  investment.  The  rate  of  profit  on  cost  in 
this  latter  case,  however,  should  not  be  materially  different  from 
11.3%  if  the  relative  true  costs  of  producing  the  866  pound 
job  and  the  433  pound  job  were  known. 

Profit  Rate  Verification 

Even  with  the  best  cost  system  and  cost  practice,  there 
are  occasional  jobs  on  which  it  is  extremely  difficult  to  secure 
an  accurate  cost.  There  are  conditions  and  elements  of  an 
extraordinary  nature  that  enter  into  the  cost  of  the  job  which 
a  system  cannot  reflect,  or  which  it  is  not  practicable  to  have 
it  reflect.  This  condition  often  results  in  leading  foundrymen 
to  believe  they  are  making  a  fair  profit  on  particular  work, 
when  as  a  matter  of  fact,  they  are  not. 

The  fact  that  a  loss  is  incurred,  or  that  the  margin  of 
profit  is  not  sufficient,  can  be  determined  by  checking  the  profit 
in  dollars  per  output  per  molder  per  day  against  the  rate  of 
profit  shown  by  the  production  cost.  For  example,  we  will 
assume  that  for  a  particular  intricate  job  the  cost  as  shown 
by  the  records  is  10  cents  per  pound  and  the  average  output 
per  molder  per  day  is  167  pounds.  At  a  price  of  12  cents 
per  pound,  the  profit  seemingly  is  20%  on  cost  and  may  be 
considered  very  commensurate  and  be  above  the  average  rate 
of  profit,  nevertheless,  in  reality  it  may  be  far  less  than  the 
average.  We  will  assume  that  the  records  for  the  preceding 
month  for  the  entire  plant  show  the  following: 


260  FOUNDRY  COST  ACCOUNTING 

Tons   produced    1,000 

Selling  price  per  ton   $115.00 

Cost  per  ton    100.00 

Profit   per    ton    15.00 

Rate  of  profit  on  cost 15% 

Molding  days  of  8  hours  each 3,000 

Average   production   per   molder   per   day 

(lbs.)     667 

Average  profit  per  molder  per  day $5.00 

While  the  apparent  rate  of  profit  on  the  special  job  is  20% 
as  compared  with  an  actual  profit  of  15%  on  the  entire  out- 
put, nevertheless,  the  special  job  yields  an  actual  profit  of  but 
two-thirds  of  the  average  rate.  This  is  evidenced  by  the  fact  that 
a  production  of  167  pounds  at  a  profit  of  2c  per  pound  gives  a 
profit  per  molder  per  day  of  $3.34  as  compared  with  an  average 
profit  per  molder  per  day  of  $5.00  for  the  entire  plant. 

It  is  an  excellent  practice,  therefore,  in  drawing  conclusions 
as  to  the  profitableness  of  work,  or  in  making  price  adjust- 
ments, to  compute  the  profit  not  only  in  percentage  on  cost 
but  in  dollars  per  molder  per  day.  If  the  profit  per  molder  per 
day  is  not  satisfactory  the  price  is  not  sufficiently  high  even 
though  the  percentage  of  profit  on  apparent  cost  is  satisfactory. 

Profit  Per  Day  Per  Unit  of  Molding  Floor  Space 

In  computing  profit,  the  production  per  molder  per  day 
should  be  in  terms  of  units  of  molding  floor  space.  If  in  a 
given  foundry  there  are  100  productive  units  of  molding  floor 
space  of  equal  size  and  if  each  unit  of  floor  space  were  occu- 
pied by  a  molder,  it  is  evident  that  the  day's  production  should 
be  divided  by  100  to  obtain  the  average  production  per  molder 
per  day  or  per  unit  of  floor  space.  It  is  also  evident  that  if  a 
profit  of  $5.00  per  day  per  unit  of  molding  floor  space  is  needed 
to  yield  a  fair  return  on  the  investment  that  each  molder  and 
each  unit  of  floor  space  must  produce  a  profit  of  $5.00.     If, 


PROFITS  261 

however,  the  nature  of  a  particular  job  were  such  that  a  molder 
needed  two  units  of  floor  space,  the  day's  profit  on  his  particular 
work  should  be  $10.00,  otherwise  that  particular  job  would  be 
only  half  as  profitable  as  the  jobs  that  could  be  handled  on  one 
productive  unit  of  floor  space  and  which  produced  a  profit  of 
$5.00  per  day.  Therefore,  the  profit  should  be  in  terms  of  pro- 
duction per  day  per  unit  of  molding  floor  space.  To  give 
effect  to  this  on  the  records,  all  that  is  necessary  is  to  show 
the  number  of  molding  hours  per  unit  of  floor  space.  That 
is  to  say,  if  for  a  particular  floor  job  a  molder  and  a  helper 
occupied  three  units  of  floor  space,  working  eight  hours  per 
day,  the  job  should  be  charged  with  twenty-four  hours  molding 
time,  or  three  units  of  molding  floor  space.  If  the  production 
per  day  of  the  two  men  were  2,000  pounds  and  the  profit  were 
y2z  per  pound,  the  profit  per  day  per  unit  of  molding  floor 
space  would  not  be  $5.00,  but  only  $3.33. 

The  true  relation  between  production  per  day  per  unit  of 
molding  floor  space  and  the  rate  of  profit  per  hundred  pounds 
at  rates  of  from  $5.00  to  $10.00  per  day  per  unit  of  floor 
space  is  shown  in  the  following  table: 


262 


FOUNDRY  COST  ACCOUNTING 


PROFITS  IN  RELATION  TO  PRODUCTION 

Production 
Per  Day 

Required  Profit  per  100  Lbs.  to  Produce  a 
Profit  per  Day  per  Unit  of  Molding  Floor  Space  of 

Molding 
Floor  Space 

$5.00 

$6.00 

$7.00 

$8.00 

$9.00 

$10.00 

(lbs.) 
2,000 

$0.25 

$0.30 

$0.35 

$0.40 

$0.45 

$0.50 

1,900 

.264 

.316 

.368 

.421 

.474 

.526 

1,800 

.278 

.333 

.389 

.444 

.50 

.555 

1,700 

.294 

.353 

.412 

.471 

.529 

.588 

1,600 

.313 

.375 

.438 

.50 

.563 

.625 

1,500 

.333 

.40 

.467 

.533 

.60 

.667 

1,400 

.357 

.429 

.50 

.571 

.643 

.714 

1,300 

.385 

.462 

.539 

.615 

.692 

.769 

1,200 

.417 

.50 

.583 

.667 

.75 

.833 

1,100 

.455 

.545 

.636 

.727 

.818 

.909 

1,000 

.50 

.60 

.70 

.80 

.90 

1.00 

900 

.555 

.667 

.778 

.889 

1.00 

1.111 

800 

.625 

.75 

.875 

1.00 

1.125 

1.25 

700 

.714 

.857 

1.00 

1.143 

1.286 

1.429 

600 

.833 

1.00 

1.167 

1.333 

1.50 

1.667 

500 

1.00 

1.20 

1.40 

1.60 

1.80 

2.00 

400 

1.25 

1.50 

1.75 

2.00 

2.25 

2.50 

300 

1.667 

2.00 

2.333 

2.667 

3.00 

3.333 

200 

2.50 

3.00 

3.50 

4.00 

4.50 

5.00 

100 

5.00 

6.00 

7.00 

8.00 

9.00 

10.00 

INDEX 


A 

Pagb 

Accounting   Practice   and    Records 47 

Principles    of     25 

Accounting   in    the    Foundry    Industry    Not    Difficult 40 

Accounts,    Classification    of 127 

Grey    Iron    Foundries    128 

Malleable    Iron    Foundries 140 

Steel    Foundries 157 

Accounts    Payable    Voucher 60 

Form    of 63 

Advantages  of  Preparing  Estimates   in   Uniform   Manner 249 

Air    Chipping    117 

Annealing    Department    112,  232 

Annealing  Oven  Report    115 

Form    of     116 

Annual  Physical   Inventory   59 

Application    of    Cost    Principles 42 

Avoidance  of  Unnecessary  Detail 42 


Basis    of    Physical    Inventory 59 

Better    Competitive    Spirit 31 

Blacksmith    Shop     75 

Form  of  Time  and  Material  Report 76 


Carpenter  Shop 95 

Form   of  Time   and   Material   Report 94 

Check,  Voucher,   Form  of 62 

Chipping,   Air    117 

Class    Costs 206 

Classification  of  Accounts    127 

Grey    Iron    Foundries 128 

Malleable   Iron   Foundries    140 

Steel    Foundries    157 

Cleaning    Department     104,  220 

Co-operation  in   Cost  Work 26 

Co-operation   of   Management   Needed 39 


263 


264  INDEX 


Page 

Comparative    Statement   of   Total    Costs 200 

Competition,    Effect  of   Uniform    Cost    Finding    Methods    on 25 

Intelligent    Competition    Depends    Upon    a    Knowledge    of 

Costs     28 

Core   Delay    98 

Form  of  Report   98 

Core     Loss 97 

Core     Production     97 

Core   Production    Order    97 

Coremaking    Department     96,  220 

Coremaking    Direct    Labor    214 

Coremaker's   Summary   Production   Card 99 

Illustrated     Form    of 100 

Coremaker's    Summary    Production    Sheet 99 

Illustrated     Form    of 101 

Core    Stock    Record    102 

Form     of 103 

Core    Ticket    98 

Form    of 99 

Cost  Comparisons,    Value    of 27 

Cost  Finding,  Widely  Different  Methods  in  Use 25 

Cost  Practice,    Expansion    of 41 

Cost  Principles,   Application   of 42 

Cost  Uniformity    Needed     27 

Cost  Work,    Co-operation    in 26 

Cost  System,  an  Investment,  Not  an  Expense 22 

Flexibility    of 29 

Installing    and    Operating    39 

Objection    to    Installing    21 

Should  not  be  Independent  of  General   Books 44 

Costs,   Average    Misleading    16,  18 

Advantages    of    Modern    Methods 18 

An    Index    of    Operating    Efficiency 20,21 

Class 206 

Customer's 208 

Government    Urging    Improvement    in    Methods 19 

Intelligent  Competition  Depends  Upon  a  Knowledge  of 28 

Job     208 

The    Old  True    Price    Basis 17 

Tonnage      205 

Uniform    Methods    of    Finding 25 

Customer's    Costs    208 

Customer's  Pattern  Cost  Record    90 

Form    of     91 

D 

Daily    Heat    Record,    Form    of 75 

Definition    of    Accounts    127 

Grey   Iron    Foundries 130 

Malleable    Iron    Foundries    143 

Steel    Foundries     160 


INDEX  265 

Page 

Departmental  Pay  Roll,  Form  of 68 

Depreciation 235 

Causes    of    235 

Methods    of    Providing    for 236 

Straight    Percentage    Method    237 

Reducing    Balance     Method 238 

Combined   Depreciation   and   Maintenance   Method 238 

Rates   of    241 

Depreciation    of   Pattern    Equipment 245 

Depreciation,   Taxes  and   Insurance 186 

Form  for  Distributing  Departmentally   192 

Design    of   Forms    44 

Detailed    Equipment    Record    246 

Form   of    248 

Diagram  of  Accounts — 

For  Large  Grey    Iron    Foundries 172 

For  Large  Malleable    Iron    Foundries 180 

For  Large  Steel    Foundries     176 

Direct    Charges    209 

Direct    Labor,    Coremaking 214 

Finishing      214 

Molding 214 

Distribution   of   Fixed   Plant   Charges 185 

Depreciation,  Taxes  and  Insurance,   Form   of 192 

Medical  and  Hospital  Expenses,  Etc.,  Form  of 191 

Power,  Heat  and  Light,   Form  of 190 

E 

Efficiency,  Costs  an  Index  of 20,  21 

Elimination   of   Hard    Iron   Weight 110 

Elimination    of    Waste 36 

Employees,    Record    of 71 

Equipment    Inventory    Sheet 245 

Form    of     247 

Equipment    Record 246 

Form    of    248 

Estimate    Sheet,    Form   of 252 

Estimates    . 249 

Advantages  of  Preparing  in  Uniform  Manner 249 

Explanation  of  Estimate   Sheet 251 

Form  of  Estimate   Sheet 252 

Importance    of    249 

Preparing     and     Preserving 250 

Estimates    and    Quotations. 249 

Examination   of   Plant   Practices   and   Operating   Conditions....  33 

Of  Raw  Materials  and  Methods  of   Handling 33 

Of    Operating    Conditions 35 

Of    Operating   Departments    34 

Examination,    Reasons    for    33 

Expansion  of  Cost  Practice   41 

Explanation    of    Estimate    Sheet 251 


266  INDEX 

F 

Page 

Federal    Trade     Commission     15,  19 

Finishing    Direct    Labor    214 

Finishing    Room    117 

Finishing    and     Shipping     Department 117,222 

Time   Report,   Forms   of    118,  119 

Fixed   Plant    Charges,    Distribution    of 185 

Flexibility  of  Cost  System 209 

Forms,    Design    of    44 

Forms — 

Accounts    Payable    Voucher    63 

Annealing  Oven  Report 116 

Blacksmith  Shop,  Time  and  Material  Report 76 

Carpenter  Shop,  Time  and   Material   Report 94 

Comparative    Statement   of   Total    Costs 200 

Core    Delay    Report     98 

Core    Stock    Record    103 

Core    Ticket    99 

Coremaker's   Summary   Production   Card 100 

Coremaker's   Summary   Production    Sheet 101 

Customer's    Pattern    Cost    Record 91 

Daily     Heat     Record 75 

Departmental    Pay   Roll    68 

Distribution    of    Power,    Heat    and    Light 190 

Distribution    of    Depreciation,    Taxes    and    Insurance 192 

Distribution  of  Medical  and   Hospital   Expenses,   Etc 191 

Equipment     Inventory    Sheet 247 

Equipment    Record     248 

Estimate    Sheet 252 

Finishing    Department   Time    Record 118,  119 

Invoice      122 

Job    Cost    Card    233 

Job    Cost    Record 230 

Matchmaker's    Daily   Report 88 

Molder's  Daily    Production    Card 82 

Molder's    Summary    Production    Card 86 

Molder's    Summary    Production    Sheet 84 

Monthly    Statement    of    Labor    Costs 196 

Monthly   Statement   of   Total    Costs 198 

Oven     Record     .110 

Pattern   Shop   Repair   Order    93 

Pattern  Shop  Time  and  Material  Report 90 

Pattern  Vault  Card 92 

Pay    Roll    68 

Pay   Roll   Distribution   Sheet    70 

Pig  Iron  Analysis  Record 77 

Production   Order    80 

Production    Order    Tag 81 

Production     Statement     202 

Profit    and    Loss    Statement 203 

Profits   in   Relation  to   Production 262 


INDEX  267 


Page 

Purchase     Order     . 49 

Purchase    Requisition 47 

Record    of    Employees    71 

Record  of   Iron    Consumed    56 

Record    of    Returned    Castings 124 

Recapitulation  of  Monthly  Fixed  Plant  Charges 194 

Shipping   Record    120 

Stock    Record     51 

Stores     Requisition 53 

Superintendent's    Daily    Production    Report 87 

Summary   Record   of   Shipments 121 

Table  of  Depreciation   Rates    241 

Trimming     Department     Count 109 

Trimming   Department    Report 108,111 

Voucher    Check    62 

Voucher    Record    64 


General   Expense    224 

Government  Urging  Improvement  in  Cost  Methods 19 


H 
Heats,   Record   of 75 


Indirect    Charges,    Methods    of    Distributing 216 

Molding  Direct     Labor     Basis 217 

Molding  Man-Hour    Basis     217 

Molding     Machine-Hour     Basis 217 

Tonnage    Basis     218 

Importance  of  a   Knowledge  of  Costs 15 

Importance  of  Reliable  Estimates 249 

Inspection    Report    107 

Installing  and  Operating  a  Cost  System 39 

Interest   on    Investment    188 

Inventory   of   Coal    57 

Of  Coke    56 

Of  Fire    Brick 58 

Of  Partly   Finished   and    Finished    Castings 58 

Of  Pig     Iron     55 

Of    Sand 58 

Inventory,    Basis    of     59 

Physical      59 

Invoice,    Form   of    122 

Invoices    from    Creditors 49 


268  INDEX 

J 

Page 

Job    Cost    Card    232 

Illustrated   Form   of    233 

Job    Cost    Record    238 

Illustrated    Form    of 230 

Job    Costs    208 

Journal    Entries    to    Distribute    Fixed    Plant    Charges    Depart- 
mentally     188 


L 

Labor   Costs,    Monthl}'   Statement   of 196 

Laboratory     78 


M 

Market  Price  of  Iron  Should  be  the  Iron  Quotation  Basis 255 

Matches 88 

Matchmaker's   Daily  Report,   Form  of 88 

Melting      211 

Melting    Department    74 

Departmental    Line     74 

Metal      210 

Methods  of  Distributing  Indirect  Charges 216 

Molding   Direct    Labor    Basis 217 

Molding   Man-Hour   Basis 217 

Molding     Machine-Hour    Basis 217 

Tonnage    Basis     218 

Methods  of   Providing  for  Depreciation 236,  238 

Modifying  an  Existing  Cost  System 40 

Molding    Department    78,  218 

Departmental    Line     79 

Molder's    Daily    Production    Card 81 

Illustrated    Form    of    82 

Molder's    Summary    Production    Card 83 

Illustrated   Form   of 86 

Molder's    Summary    Production    Sheet 83 

Form    of 84 

Molding   Direct    Labor    214 

Monthly    Statements 195 

Monthly  Statement  of   Labor    Costs 196 

Monthly   Statement   of   Total   Costs 198 

O 

Objections  to  Installing  a  Cost  System 21 

Operating    Departments    and    Department    Records 73 

Oven    Record    109 

Form    of     110 

Overhead  Expense,  Importance  of  an  Equitable  Distribution  of.  226 


INDEX  269 

P 

Page 

Pattern    Shop    Records    89 

Forms   of    90,92,93 

Pattern   Shop   Repair   Order 94 

Form   of    93 

Pattern   Vault   Card    92 

Form    of     92 

Patterns,   Flasks,  Tools  and  Small   Equipment   Items 245 

Pay    Roll 67 

Form   of    68 

Pay   Roll   Distribution    Sheet    69 

Form   of    70 

Physical  Inventory,  Annual,  Basis  of 59 

Pig    Iron    Analysis    Record,    Form    of 77 

Plant    Order    36 

Importance    of    36 

Pots   and    Bottoms    113 

Power,    Heat    and    Light 35,  185 

Form    for    Distributing    Departmentally 190 

Preparation    of    Reports     43 

Preparing  and    Preserving   Estimates 250 

Price,  an  Accurate  Cost,  the  Only  True  Basis 17 

Principles  of  Accounting    25 

Product,   Class  of    35 

Product    Costs    205 

Production    Order     79 

Form   of    80 

Production   Order  Tag   80 

Form    of     81 

Production  Per  Molder  Per  Day,  the  Profit  Factor... 258 

Production   Statement,    Monthly   and    Comparative 202 

Profit   on    Each   Class    of   Work 16 

Importance     of     Knowing     257,  260 

Profit  and  Loss   Statement,   Form  of 203 

Profit    Rate    Verification     259 

Profits    257 

Ideas    of    257 

In   Relation   to   Production 262 

On  Light  and  Heavy  Work 257 

Per  Day  Per  Unit  of  Molding  Floor  Space 260 

Table  of,  in   Relation  to  Production 262 

Purchase   Order    48 

Form    of 49 

Purchase    Requisition     48 

Form  of 47 


Rates    of    Depreciation 241 

Recapitulation  of  Monthly  Fixed  Plant  Charges 187 

Illustrated   Form 194 


270  INDEX 

Pack 

Record  of  Employees 71 

Form    of 71 

Record    of    Heats * 75 

Form    of    75 

Record  of   Iron    Consumed,   Form   of 56 

Record  of  Pig  Iron  Analysis,   Form  of 77 

Record  of  Returned  Castings,  Form  of 124 

Repairs    and    Their    Treatment 239 

Repairs     and      Replacements 239 

Replacements    Restore    Plant    Values    and    Reduce    Accrued   De- 
preciation        243 

Reports,   Preparation   of    43 

Returned    Castings    123 

Form   of   Record   for 124 

Rigid   Inspection  an   Important  Cost  Factor 107 


Sand-blasting 105 

Shifting      85 

Shipping    Record 120 

Forms    of    120,  121 

Shipping    Room     120 

Shop    Order     95 

Slag     Mill     76 

Special   Pattern   and    Flask   Expense 214 

Stock    Record 52 

Form   of    51 

Stock    Record,    Core    102 

Form    of     103 

Stores 50 

Stores    Requisition    52 

Form    of     53 

Stores    System    Not    Essentially    Required    for    Cost   Accounting 

Purposes      54 

Summary   Record  of   Shipments,   Form  of 121 

Superintendent's    Daily    Production    Report 88 

Form    of    87 


Table    of    Depreciation    Rates    241 

Time    Record,    Finishing    Department 117 

Forms     of 118,  119 

Tonnage    Costs     205 

Total    Costs,    Form   of    Comparative    Statement 200 

Total   Costs,    Monthly   Statement   of 198 

Trade    Associations     30 


INDEX  271 

Page 

Trimming    Department    Report 110 

Forms     of     108,  109,  111 

Trimming     and     Inspecting     Department 107,  221 

Tumbling 104 

Tumbling  and  Sand-blasting,  Costs  of 106 


U 

Uniform    Cost    Finding    Methods 25 

Effect  on   Competition 25 

Uniform  Forms   Not  Essential    44 


Value  of  Cost  Information 15 

Voucher,    Accounts    Payable 60 

Form    of     63 

Voucher   Check,   Form   of    62 

Voucher    Record 61 

Form   of 64 


W 

Waste,    Elimination    of    36 

Weakness  of  the  Foundry  Industry  29 

Work  of  Trade  Associations    30 


THIS  BOOK  IS  DUE  ON  THE  LAST  DATE 
STAMPED  BELOW 


AN  INITIAL  FINE  OF  25  CENTS 

WILL  BE  ASSESSED  FOR  FAILURE  TO  RETURN 
THIS  BOOK  ON  THE  DATE  DUE.  THE  PENALTY 
WILL  INCREASE  TO  50  CENTS  ON  THE  FOURTH 
DAY  AND  TO  $1.00  ON  THE  SEVENTH  DAY 
OVERDUE. 


OCT    9    1933 


FEB    14 


1934 


-MAfr-3- 


JUN  2  1941 


.  


_^_ 


TZZ7 


APR   111931! ]5APr'5°^ 


J6Jan54VL 


kVW 


iwl  31954 


JU L^-i^- 


W^ 


11  193S 


DEC  12  1341V 


L-D  21-100m-7,'33 


439046 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 


